Finally, the red light that the government feared most came on: the fiscal numbers, the basis of the economic program of Javier Mileithey had a turning point in March, when it occurred a return to the numbers in red, both at the primary level – that is, comparing current income and expenses – and at the financial level – that is, also discounting the interest payment on the debt.
This is, at least, the warning that arises from the latest report of the Congressional Budget Officewhich monthly reports the results of the fiscal accounts one week in advance of the data published by the Ministry of Economy.
These OPC numbers are usually considered a predictor of the official figures, although there is not necessarily a coincidence in the figures. The report covers the central administration – not the entire public sector – and is about “accrual basis” figures and not “cash basis” -that is, on expenses incurred but not necessarily already paid-, which implies that there could be changes in the final version.
But more than the numbers, what is relevant is “the story” that the fiscal accounts tell: that, after eight consecutive months in which there was a real year-on-year drop in tax revenue, and in the face of the difficulties in continuing to apply the “chainsaw” to public spending where large cuts have already been made, the fiscal result is becoming dangerously thin.
Put into numbers, in March the OPC recorded total current income of $11 billion, while expenses amounted to $12 billion. That is, an economic result in the red for $1 trillion, which is reduced to $700,000 million when income from investments and capital transfers are considered.
The financial result, after paying interest on the public debt, registers a deficit of $1.3 trillion.
The return of public spending
These numbers mark the entry into a dangerous zone, in which the government puts at risk its fiscal goal for the year, consisting of a primary surplus of 2.2% of GDP, expanding last year’s achievement, when the positive balance was 1.4%.
And the figures are the result of a lethal combination: Falling income along with hard-to-cut spending. In fact, public spending is already showing an increase in real terms.
One of the items in which the government is “recomposing relative prices”, such as rates for public services, was, paradoxically, one of those that registered the highest costs due to subsidies. In March, The year-on-year increase in state energy subsidies was 89% -speaking in silver, about $400,000 million-.
The OPC details that this expense was made up of transfers to Cammesa – the mixed ownership company that wholesales energy to the national system – to address the gap between the costs and rates of electricity generation. In addition, transfers were recorded to the Trust Fund for Residential Gas Consumption Subsidies.
Expenditure increases were also recorded again in the crucial area of retirements and pensions, which represents, by far, the main item of the budget, with 42% of the total. In March, expenditure was $5.1 billion, which represents a real increase of 1.1% compared to last year.
And the perspective is that this spending will continue to rise, given the inflationary surge in recent months. The March retirements took the January CPI as a reference, which was 2.9%. The same figure will be applied to the April payment and, according to the forecasts of private consultants, the number could be even higher for the payment of liabilities in May – which will be adjusted according to the March CPI.
If spending on social assistance programs and non-contributory pensions is added to retirements, then spending on social benefits jumped to $8.3 trillion in March, which represents a real increase of 1.6% year-on-year.
As almost always, The largest item that played the role of adjustment variable was the salaries of state personnel. also one of the largest in the budget, with 11% of total public spending. In the month, the wage bill of public workers fell 0.7% in real terms, which implies that in the first quarter of the year it accumulated a drop of 5.8%.
It is not surprising that one of the sectors with the greatest union conflict is, precisely, that of the State workers unions, whose salary has evolved below inflation since the middle of last year, according to Indec statistics.
Waiting for the tax rebound
Despite the poor result in March, when it was consideredto the fiscal balance of the first quarter, The numbers remain positive, at $6.8 billion at the primary level and $2.3 billion at the financial level.
The concern among economists is that, with an economy that has yet to show signs of full recovery, there is no optimism about a drastic improvement in income.
With just a nominal increase of 26.2%, Tax collection had a year-on-year drop of 4.5% -assuming that the March CPI will be around 3% and accumulated annual inflation will be 32.2%-. This means that March has had one of the worst performances in terms of tax revenue, and puts greater pressure on the government to accentuate the “chainsaw” on public spending, so as not to put the primary surplus at risk.
The most striking item in the March collection is that linked to foreign trade. With barely $503,000 million – barely 3% of the collection “pie” – the withholdings made a very meager contribution. In the year-on-year comparison it is a drop of 35%, something that is explained by the export boom that was registered a year ago after the temporary reduction of the agricultural tax.
Thus, despite the optimism due to the good volumes achieved in the harvest – and the forecast of Toto Caputo about an export income of US$42,000 million due to contributions from the countryside-, a positive change has not yet been reflected in the ARCA box.
What seems certain is that, despite criticism for the increases in input costs – derived from oil -, the field will not have another help from a “tax holiday” this year. The tax numbers are too tight for Caputo to afford to do without withholdings.
Above all, when he has just been forced to postpone the update of the fuel tax, with the aim of not accentuating the social bad mood after the price increase at service stations.
With a real increase of 35%, the fuel tax has become one of the pillars of collectionto the point that it is already more important than export duties and import tariffs.
Chainsaw near the limit
But the concerns are not limited to income, but also to the diminishing returns of the “chainsaw.” The economists who analyze the fiscal accounts affirm that the first year everything was facilitated by the “inflationary liquefaction” of pensions and for the brake on public works. But, from there, you enter a stage in which most of the spending is rigid.
Still, they are beginning to emerge skeptical views on which the surplus can be sustained only with rate increasesand progress will be necessary in structural reforms, with further cuts in the payroll of state employees. What economists see is that a greater effort is needed in cutting, to obtain a marginal improvement in the accounts.
