In January , the largest real year-on-year cut in public spending in the last 30 years
took place ,
as revealed by the IARAF after the Government released last month's public accounts.
With income the same as in 2023, all the improvement in the fiscal result was explained by the reduction in spending: the sectors that contributed.
From the analysis of the budget execution of January 2024,
it appears that total income had a real year-on-year increase of 0.7%.
This is based on the fact that tax revenues grew by 0.8% and non-tax revenues fell slightly in real terms, according to the analysis of the institute directed by Nadin Argañaraz.
Public spending infographic.
"On the primary spending side,
a real interannual decrease of 39.4% was recorded.
It should be noted that this real variation in primary spending turned out to be the largest real interannual variation in the last 30 years," they detail.
As a result,
the primary deficit was transformed into a primary surplus of $2,010,000 million.
Interest expense increased 26% in real terms compared to the same month last year.
The fiscal deficit became a fiscal surplus of
$518.4 billion.
"The entire change in the fiscal result was explained by a real reduction in spending."
The expenses that were reduced the most and contributed the most to the surplus result were
retirement and contributory pensions (-$885,074),
energy subsidies (-$366,451), real direct investment (-$321,474) and total transfers to provinces (-$310,781). ).
Between the four of them, they contributed almost $1,883,000 million in January 2024 currency, that is,
70% of the total saved.
The IARAF specifies that
15 of the 16 expenditure components had falls.
The exception was INSSJP benefits, which had a real year-on-year increase of 3.4%.
The items that had the greatest real fall were: capital transfers to provinces (-98.3%), subsidies to other functions (-92.2%), real direct investment (-81.2%), energy subsidies ( -77.2%) and Current transfers to provinces (-72%).
"The chainsaw and the blender, which are the pillars of the adjustment, are not negotiated," President Javier Milei confirmed last week.
And that was what happened in the first two months of management, although it was not even for everyone: while some joint ventures achieved a certain recomposition,
retirements deepened their deterioration by falling 17% in real terms,
after having fallen 3.7% in real terms. in December (without bonus).
The blow to salaries was reflected in the reduction in spending last month and the improvement in public accounts, which made it possible to achieve the first financial surplus in January since 2012. Thus, after the mass of resources for the payment of salaries fell 10.8% real in October, 18.9% in November and 23.9% in December,
in January it was worse and plummeted 38.1%.
Although during the first month of the year spending decreases in real terms compared to December, when bonuses are paid, the liquidation of assets was due to the fact that in the last month of 2023 they increased below inflation due to the mobility (which follows salaries and collection) since
the government did not grant an emergency reinforcement in January beyond the bonus.
Retirements continue to lose purchasing power.
"The current formula for updating pensions has been liquefying purchasing power for a long time. Given that there is a delay in how the formula adjusts, in December the July-September period is taken into account, and you are under monthly inflation that is around 20 "%,
it is logical that you have less spending on retirements
," explained Francisco Ritorto, economist at ACM.
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INDEC revealed that January inflation was 20.6%, while the year-on-year figure was 254.2%.
In this way, the Government moved forward with a greater adjustment in January, despite the fall of the fiscal package included in the omnibus law, which contemplated a new mobility tied to inflation from April and
"ate up" the month of January.
Minister Luis Caputo would seek to achieve zero deficit with the liquefaction of retirees, the increase in taxes (PAIS and fuel) and the "chainsaw" in other expenses.
Thus, in the midst of the fight with governors and the negotiations with the IMF,
the minister applied a strong cut in subsidies to energy and transportation
(-64% real), transfers to the provinces (-72%) and public works. (-86%).
The risk, according to the column published this Sunday in
Clarín
by economist Marina dal Poggetto, is that it is
"a megaliquation of spending that is not sustained."
In the case of wage earners, the real income of formal workers in December hit the lowest levels since the 2002 crisis. That month the main unions obtained on average increases below inflation, while in January it was the other way around.
Even so,
joint ventures accumulated increases of 38% on average in the two-month period, while inflation exceeded 50%
, according to the Capital Foundation.
The joint ventures did not recover the ground lost in January.
"Where there is the most bargaining power, which is in the registered private sector,
2024 will be the seventh year of decline in real wages (30% real decrease, 10% in 2024)
, which makes evident the low tolerance that would remain. Stagflation affects real wages and sudden inflationary jumps cause strong deteriorations," said Carlos Pérez, director of the Capital Foundation.
Much worse was the situation of those sectors without parity or updating clauses.
According to GMA Capital, in the last six years until 2023, retirements, the minimum, vital and mobile wage and informal workers took the worst part, with
a drop in accumulated purchasing power of 27.4%, 30%, 4% and 45.5%
, respectively.
For savers, the start of 2024 was not good either, since
the rate once again lost against inflation by falling 9.5% in real terms,
although less than December (12.3%).
"The Central Bank lowered the rate with the aim of reducing liabilities, in that it was successful, but it also ended up liquefying the savings of the private sector," said Alejandro Giacoia, economist at Econviews.