Sergio Massa promises to close the deficit with the IMF, but public spending is likely to rise again

Saúl Ubaldini once told Juan Sourrouille, Raúl Alfonsín’s Minister of Economy, that “if inflation rises it’s his problem, but if wages go down it’s my problem”. He was in the middle of a negotiation to avoid a new wage request and strike by the CGT.

Sergio Massa, Minister of Economy, will sooner or later face this dilemma because inflation is preparing to make a final sprint towards the end of the year and trade unions and social organizations try to anticipate in order not to be relegated.

Part of this has already been seen this Wednesday after the CGT’s massive claim for inflation and against an increase by decree as the executive power understands. Formal workers demand free equality, as is logical when it comes to protecting themselves in a context where public services will increase to make matters worse. And not to mention seeing what happens to the dollar. Separate chapter.

The demands and pressures on public spending are growing.

– The UPCN union is against the increase by decree and in favor of free parity. The amount of salaries of employees who depend on the national administration is equal to 12% of primary expenditure.

– The CGT and the CTA are demanding an increase in the minimum wage and since the social plans are indexed to it, the beneficiaries of plans like Enhance (1.3 million) would see an increase in their income.

– The Evita Movement presses that its budget does not lose with the expected increase in inflation.

In macroeconomic terms, the most relevant spending figures so far have been those announced last week by Massa himself: pensions will rise by 15.53% in September, as indicated by the Mobility Law. It also added a “monthly reinforcement” of $ 7,000 for three months for 6 million retirees who receive the minimum. The fiscal cost of the reinforcement will be close to $ 150,000, economist Fernando Marull calculated. This is almost three times the savings announced this week by the Secretary of Energy, Flavia Royón, for the “redistribution of subsidies”: about 50,000 million dollars by the end of the year.

Conclusion?

Economists are starting to make numbers and believe that the announcements that Massa has made and that he would make are not enough to reach the goal of reducing the fiscal deficit to 2.5% of GDP. As spending is released today and even after the announcements for the time being, economist Sebastián Menescaldi of the consultancy Eco Go calculates that by the end of the year, government spending is expected to fall by 10% discounting inflation (in real terms).

For Marull, the IMF target of 2.5% will only be achievable if inflation reaches 100% (plus tax collection) and campaigns manage to pay more (more withholdings).