Bachelor of Economics (UBA). Economic Analyst of Libertad y Progreso.
INFOBAE– British regulators approved the vaccine against covid-19 developed by the American company Pfizer and its German partner Biontech. This is a very positive sign globally and this is quickly reflected in the revisions to the economic projections for next year.
Let us remember that in recent weeks the possibility of a second wave being triggered was being considered; which implied an additional risk to world economies that expected 2021 to recover from the onslaught of this year that affected 90% of countries.
This crisis, unlike conventional economic crises that occur due to a drop in aggregate spending and where governments had greater scope to increase aggregate spending and thus counteract the recession, occurs due to a supply shock. The fall in economic activity occurred because productive activities could not be carried out normally due to the fact that social distancing policies prevented mobilization towards jobs. Therefore, by not producing, wealth was not created.This year Argentina would fall close to 11.5%, but since 2011 our country has not grown and this is not something that will change once the vaccine is insured
Obviously, as restrictions were relaxed, countries began to recover, but with the main risk of the virus persisting for longer.
In that sense, a scenario in which the vaccine is rapidly developed and can be applied to a large part of society is much more favorable than one in which it is not. Therefore, it is excellent world news. Also for our country because that means that the pandemic will stop being a headache. However, that does not mean that the economic problems will be solved with the arrival of the vaccine.
This year Argentina would fall close to 11.5%, but since 2011 our country has not grown and this is not something that will change once the vaccine is insured. The root of the decline in which we are immersed is the large fiscal deficit, which went from 0.6% of GDP in 2009 to 3.8% of GDP in 2015, ending 2019 with a deficit of 1.9% of GDP .
If the State spends more than it receives, it has two paths. The first is the one that would allow him to grow and lower public spending; For this, it is essential to face a series of structural reforms: reducing the size of the State, labor reform, lower taxes, reform of the pension system and trade opening. The second is recessive, resorting to forms of financing that condemn the possibility of consolidating sustainable economic growth: increasing taxes, taking on debt or issuing local currency.The root of the decline in which we are immersed is the large fiscal deficit, which went from 0.6% of GDP in 2009 to 3.8% of GDP in 2015, ending 2019 with a deficit of 1.9% of GDP
In Argentina the recessive path was chosen, which explains the tax and regulatory tangle that prevent the proliferation of new productive projects and hinder the normal development of current investments. That translates into less innovation, less capital, less work and a gradual fall in real wages. Today, for every $ 100 a company with 60 employees earns, if you pay all taxes, you leave the State $ 106. That is, you pay taxes, inclusive, with your initial investment.
If money is issued, without there being production to sustain this increase in demand, the result is the loss of the purchasing power of the currency. In Argentina we went from an annual inflation of 3.7% to the 37.3% annual that we project this year, with peaks that exceeded 50% annually. In addition, we are one of the five countries in the world with the highest inflation in the world.
Taking on debt without reducing the fiscal deficit quickly only stretches the impact and ends up, in the long run, with more taxes or more issuance.Today, for every $ 100 that a company of 60 employees makes, if you pay all the taxes, you leave the Status $ 106. That is, you pay taxes, inclusive, with your initial investment
This year was not the exception but the rule and we once again chose the recessive path. The result to be expected next year is an exchange rate gap, despite the increasing monetary calm in the exchange market, which will continue to deepen the drain on reserves that we have been seeing since the last period. Obviously, in this scenario, a devaluation that affects the welfare of all the coming years is to be expected. For its part, demand for the peso will continue to fall because the crisis of confidence added to the issue of 80-90% year-on-year this year increasingly corrode the value of our currency. Likewise, the country risk will continue to be high, despite the renegotiation with the IMF, because the same unresolved problems continue. On the other hand, the economy will continue to stagnate and even there is likely to be a 5.0% rebound next year, it would take us 4 years to return to pre-pandemic levels. In addition, a fiscal deficit of 3.4% is expected for this year and on the rise in 2021, so the pre-existing problems will worsen.
Again, if we want to change history, we only have to carry out reforms, restoring confidence to the markets and generating opportunities for progress for all.
As Juan Bautista Alberdi sentenced: “What does wealth require from the law to be produced and created? What Diogenes demanded of Alexander: not to overshadow him ”.
