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Pensions, subsidies and public works: how the Government's "chainsaw" will work in 2025 according to the Budget - Infobae
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Jubilaciones, subsidios y obra pública: cómo funcionará la “motosierra” del Gobierno en 2025 según el Presupuesto
Las principales partidas de gasto tendrán techos determinados. El Ejecutivo aseguró que avanzará en privatizaciones y espera un superávit comercial menor al de este año
www.infobae.com
September 16, 2024
The main expenditure items will have certain limits. The Executive assured that it will move forward with privatizations and expects a trade surplus smaller than this year.
By Mariano Boettner
Photo: Jaime Olivos
The Budget project that the Government submitted to Congress on Sunday will once again include a limit on public spending so as not to deviate from the balance in the public accounts, with some budget items that, as usual, will have discretionary management and will be subject to adjustment in the event that the fiscal margin throughout 2025 is smaller, and two inelastic expenses, such as pensions , which have their own monthly formula, and debt interest .
The economic team first proposed a scenario of balanced public accounts after the payment of debt interest. Then, it identified the items that have automatic adjustment -basically retirements and pensions- and then assigned the rest of the expenses with that expected ceiling, which is defined by the amount of income expected for this year.
In numbers: the total projected resources are equivalent to 15.1% of the Gross Product and 0.3% of the rest of the public sector. And from that starting point the size of the expenses was “distributed”, always expressed in terms of the GDP: 6.3% for pensions, 2.6% for social assistance, 1.8% for public sector salaries, 0.8% for subsidies, 0.6% for capital expenditures (public works), 0.5% for universities and 1.2% for the rest. 1.5% of the GDP is also reserved for debt interest. In this way, the balance sheet would be balanced.
(Source: Ministry of Economy)
Broadly speaking, the guidelines that the Government assured the Budget will have will be to continue with the “Social support without intermediaries”, reinforcement of allocations for security and defense and a deregulation of the State regulations. In this last aspect, the Executive Branch mentioned that it will insist on the idea of advancing in the concession and privatization of public companies ; and also that it will propose in the Budget project to eliminate more trust funds, which tend to be conduits for subsidies outside the control of the central administration. A reduction of some 50 budget programs is also foreseen.
Fiscal numbers of the 2025 Budget
The figures specifically reflect that the national public sector would end 2025 with a financial result that would be in surplus by about $190 billion , a figure barely above fiscal balance and that does not represent 0.1% of the Product. For that, the primary result would reach 1.4 trillion pesos - 1.3% of the GDP - which would be enough to cover the debt interest less the liabilities within the public sector.
On the resources side, they are estimated at almost 126 trillion pesos in 2025 , which would imply about 16.5% of the GDP. They would represent about 0.2 percentage points less than the projected closing of 2024. This number corresponds to the national public sector, the broadest way of taking into account public accounts. Of this total, practically 90% is explained by the National Administration, 6.8% by Other Non-Business Entities, 3.2% by Trust Funds, and the remaining 0.1% by Public Companies. “It is expected that almost the entire amount will be generated by current resources. By tax resources, including contributions and social security contributions, it is estimated that almost 93.8% of the income will be collected,” the economic team indicated in a document.
On the other hand, total expenditure would be 125.7 billion pesos . Discounting the interest on public debt, it would be 15.2% of the Gross Product. In comparison with 2024, it would imply a slight decrease of only 0.2% of GDP, while primary expenditure would be higher by 0.1 percentage points of GDP. The main expenditures are social security (38.2% of the total) followed by current transfers (30.3%, here the private sector is included, such as subsidies, provinces and universities).
Among the resources that the AFIP will collect throughout 2025, those that would have the greatest weight would be tax revenues, contributions to social security and property income . In total, the tax agency is expected to collect 71.2 billion pesos, 29.4% more than throughout this year. "Within these, the most important are the VAT net of refunds, which would grow 28.6%, the Income Tax (41.1%), the Tax on Credits and Debits (34%) and Export Duties (+100.4%)", the Government stated in an executive summary of the project. In the case of withholdings on exports, it would imply a very strong jump in real terms, compared to the expected inflation of 18.3 percent.
(Source: Ministry of Economy)
Taking into account only the central administration - which is the largest part of the national public sector, the financial result would actually be in deficit by about 2.3 trillion pesos . “However, as a percentage of GDP, it implies an improvement of 0.2 points compared to the result for 2024. However, it is worth noting that, if the transfers that the National Administration makes to public companies and other entities were discounted, it would present a surplus financial result in 2025, which has not happened since 2014,” the economic team indicated. “With the fiscal ordering carried out in 2024, the same behavior is expected to be obtained in the current year as that projected for 2025,” they concluded.
Other numbers: trade balance in decline
The international trade balance was estimated, according to the 2025 Budget project, at around 20.748 billion dollars . Thus, it would imply a trade balance surplus smaller than this year, which would end at 21.972 billion dollars. This decline is explained by the fact that exports would grow at a rate of 9% and imports, at 13.4 percent. This 9% of exports contrasts with the sharp increase in withholding tax collection expected by the Ministry of Finance, which would be 100 percent .The government even expects the positive balance of trade to become smaller over the years. For example, in 2026, it expects the surplus arising from the difference between exports and imports to be US$18.673 billion, and in 2027 it will be US$16.025 billion. This would imply a deterioration in the trade balance of almost US $6 billion in four years.
“The exported quantities of goods and services are projected to increase by 7.7% in 2025, maintaining a growth path in 2026-2027, while the imported volume also continues to advance, driven by economic growth, but with a decreasing elasticity to GDP towards the end of the period. The exported value of goods and services is projected to increase by 9.0% and the imported value by 13.4% in 2025, resulting in a trade surplus of USD 20,748 million in the year,” said an executive summary published by the Ministry of Economy.
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