Martín Guzmán greeted the militants on May 25.
The Government believes that the fight against inflation is here and its solution will not be quick. Otherwise, a sudden drop, they say, could produce an explosion. In this context, the Minister of Economy, Martín Guzmán, revised his calculations and now forecasts a price increase of more than 60% in 2022. The projection fIt will appear in the new budget to be made official by a decree in at least two weeks.
Without the votes that would go through Congress, the proposal will contain economic planning, including the level of collection, costs, activity and the exchange rate. And it aims to comply with the IMF. After rejecting the project budget last year, the Executive extended the 2021 budget and then agreed with the agency to file a new one in mid-April along with details of the understanding. It will finally happen, but with a delay of almost two months.
Official sources confirmed that “the order may be in a week or two, it is quite advanced.” Guzmán amended this in accordance with the financial objectives of the memorandum. There, the Fund expects the first review of the first quarter through May, to be reviewed by the board in the first half of June, and urged a “recalibration ”of policies for exceptional risks (Covid, war, global inflation and lack of political support).
One of the assumptions changed in the budget was inflation. Last year, the Economy estimated a pattern changing (29%, 33%and 45%) and still went below the real increase (50.9%). For this year, the agreement with the Fund provides for a band of between 38 and 48%. The new projection will be close to parity, which borders on 65%, but it will be lower than the inflation range of between 70 and 80% predicted by analysts.
“Inflation will be higher than estimated, it is estimated that it could be 60% or more, it depends on the recalibration,” official sources said. The government will also recalibrate the dollar, despite expected inflation. Since February, the Central Bank accelerated the devaluation rate to maintain the loss of reserves, but in May it reached a ceiling of 4% per month. If this rate is maintained, the wholesaler will reach $ 158 in December (54%), according to Jorge Neyro.
Rising prices, along with growth in activity and wages, will also affect a nominal increase in collection. However, the financial outlook remains under tension. With no major news about the unexpected income tax and the release of increasing withholdings, the Government had to use creative accounting to improve financial resources in real terms.
Spending growth on top of declining tax revenues also doesn’t help as the economy begins to cool. After the reinforcement bonus, Sergio Massa added pressure by anticipating the Income Tax floor update. For this reason, if current income and expenditure trends do not change, economists expect a core deficit of 3% of GDP, more than the stated target of 2.5%.
Energy subsidies also affected the new budget. Guzmán planned to reduce them by 0.6% of GDP, but due to the war and the official internal, it would be slower. In Economics, they argue that this projection is not a goal and that the government should determine how to reach the financial goal. however, The Fund targets spending on Covid and shifts to the provinces, among other things.
The battle for funding for transportation is another point that will delay the closing of the decree. The rejected budget provided $ 46,000 million in transportation subsidies to the provinces, but eventually there was a compromise between governors and executives to keep the item in the same range this year. This is a 64% increase from $ 28 billion transferred last year.
Source: Clarin
