Budget or fudge it II

The general tendency of critics to dismiss the 2013 draft budget as just another example of Kirchnerite fiscal fiction overlooks an important change in the growth scenario. By forecasting four or five percent for a growth rate which ended up being eight or nine percent in most years over the last decade, it was possible to generate (in tandem with inflation) billions of pesos which could be spent beyond any budgetary constraints. But the 2013 growth prediction of 4.4 percent will almost certainly be overshooting this time — beyond hopes of a bumper soy harvest (which would also cut the current price windfalls) and Brazilian pickup, this forecast is largely grounded on the momentum expected from this year’s estimated growth of 3.4 percent, an estimate which founders against the reality of virtual economic stagnation. Instead of picking up extra revenues from undershooting, the government might thus find itself having to pay up to four billion dollars in growth-linked bonds in the name of an entirely mythical economic expansion (although it would doubtless find some way of avoiding that). The other innovation is official admission of double-digit inflation at long last — the initial draft inflation estimate of 8.9 percent became 10.8 percent in the final version (a reaction to International Monetary Fund pressures over the quality of Argentine statistics?).

Coverage of the 2013 draft budget has instead tended to focus on the use of Central Bank reserves as a virtual blank cheque. Since opening up these reserves for Treasury use in early 2010, slightly more than the current level of 45.2 billion dollars has been lifted by the state although, of course, fresh flows of greenbacks have entered since — there is thus the suspicion that the reserves might largely consist of IOUs. Meanwhile the expansion of public spending (invariably 30-40 percent in the last 10 years) has been set at a decidedly modest 16.3 percent for an election year — if this figure is to be taken seriously, the government is announcing austerity when measured against any estimate of inflation other than its own. Thanks to this modest public spending increase and a projected revenue rise of 23.1 percent (here at least undershooting is alive and well), the 2013 budget promises a tiny surplus of 600 million pesos as against the current red ink of 34 billion (62 billion according to harsher estimates).

All for the best in the best of all possible worlds, then, except that the two billion dollars earmarked for Venezuelan fuel import bills indicates that the miracles expected from last autumn’s nationalization of YPF will have to wait another year.