Obervador.com.uy According to the report of National Accounts released by the Central Bank (BCU), in the last quarter of last year the Uruguayan economy contracted 0.1% over the same period the previous year and grew 0.1% from the third quarter (removing seasonal effects). 2015 expansion did not meet the expectations of private analysts. The median Economic Expectations Survey of The Observer March estimated GDP growth of 1.2% last year.
When the Executive sent the law -July Budget to Parliament last year estimated expansion of 2.5% of GDP by 2015 and 2016, 2.8% for 2017 and 3% for 2018 and 2019. Even the expansion of public spending for the first two years of the administration of Vazquez made under the assumption of growth.
“those who start comparing estimates 2015 GDP projections recommend seeing variations growth or decline in other relevant markets, “said deputy Frente Amplio Alfredo Asti.
While the economic team later reduced to 2% its estimate for last year, Economy Minister Danilo Astori , ruled in a recent interview with Presidency correct these projections, while endorsed the goal of bringing the fiscal deficit to 2.5% stipulated (in the 12 months to February red public accounts stood at 3.7% GDP, see page 12). However, analysts are skeptical that the government can meet its projections and blame already had warned.
By sector. Among the sectors, agriculture grew 1.2% last year, the industry expanded 5.7% (fully explained by the launch of Montes del Plata), while construction it was one of the worst performing sectors, with a contraction of 5.4% over the previous year. Trade, meanwhile, fell 2.5%. Transport, trade and communications category expanded 3.1%, while electricity, gas and water showed an annual drop of 8.1%.
If the main components of demand look, draws attention to the slowdown in the growth of private consumption, which maintained the same level as in 2014 (when the previous year had grown 3%). In terms of investment, there was a decline of 8.2% explained by the completion of the works of Montes del Plata. Exports of goods and services fell 1.2% in physical volume, while foreign purchases fell 7.4%. Prospects for thinking about an upturn in the level of activity of some of the most important categories of the Uruguayan economy appear as complex by 2016 (see next page).
Stagnation and adjustments. The brake of the Uruguayan economy did not surprise private analysts consulted by El Observador. The partner of the consulting firm Deloitte, Pablo Rosselli, said the 2015 data confirms that the Uruguayan economy remained “stagnant” since the expansion of 1% was due to a “drag effect” of 3.2% achieved the previous year. For the expert, the poor performance of GDP is associated with a negative external environment and the “accumulation of internal imbalances” such as loss of competitiveness, a “complex” fiscal and “rigidities” in the labor market. “All that I weighed to the outlook of consumers and entrepreneurs are more negative,” he said.
On the other hand, Rosselli recalled that the evolution of the activity confirm that the government drafted its five-year budget with a ” premise optimistic “growth that makes it” very difficult “the official target of bringing the deficit to 2.5% of GDP by the end of the government.
“Obviously Uruguay entered a stage of stagflation during 2015. The question now is how permanent will be,” said economist Aldo Lema.
“It seems reasonable that the government has to take more action on the fiscal front, but it would be a mistake to concentrate economic policy in that area, and not have higher levels of competitiveness, “said the expert. In his view, one of the objectives that must “give up” the government will be to tolerate a while inflation above 10% and a higher dollar. He added that surely lead to “a decline in real wages” register for a period of 12 to 24 months, but said that the “cost” to be paid to maintain employment levels.
Precisely for the economist Guzmán Etcheverry IEEM of the University of Montevideo, the fact of “having grown half expected (by the authorities) for the first year of government complicated because revenues were projected in based on a growth that was not observed, which widens the gap with the expenses that are inflexible and therefore complicates the fiscal deficit “.
in his view, to correct the public accounts is necessary” improved efficiency “in public enterprises, mainly in ANCAP,” since there is little room for more taxes. ” He added that it is important that the country “re-position themselves in a higher growth path” as GDP growth “is one of the statistically significant determinants of debt ratings” having to Uruguay within the investment grade.
Meanwhile, researcher Cinve Nicolas Fornasari, also recalled that at the time “the importance” of developing a budget with “credible assumptions” on growth, there “is some consensus among analysts raised on the establishment of a too optimistic by the government “scenario. He said the current growth scenario “prints additional strains on the fiscal front, where incomes will be located significantly below expectations, while spending has a high degree of rigidity, making it difficult to adjust,” he warned. The expert noted that so far, spending cuts have been concentrated in the investment category, showing a significant decline. Furthermore, we have announced increases in expected contribution to general revenues for public companies.
Adjust projections. Deloitte estimates that the Uruguayan economy will grow 0.5% this year and the activity is not “reacelerará” until he mentioned imbalances are not corrected. Meanwhile, IEEM now manages a growth estimate for 2016 is that economic activity will grow by 0.6%, which implies a downward revision from the previous estimate (0.9%). In the case of Cinve, according to Fornasari, with the “lean growth data” for the last quarter of 2015, a growth of 0.5% is expected for this year, but said they are “preliminary data”.
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