This Thursday the Institute of Statistics and Census (INDEC) published the Monthly Estimator of Economic Activity (EMAE) for the month of May 2024. The report shows a growth in the economy of 2,3% year-on-year driven by agriculture (agriculture, livestock, hunting and forestry) which grew by 103,3% year-on-year from a very low level last year due to the poor harvest of the 2023 campaign as a result of a historic drought. Taking the cumulative total of the first 5 months of the year, the economy contracted by 2.3% compared to the same period in 2023.
For its part Industry, construction and commerce continue their downward trend. Manufacturing activity fell by 14.2%, construction by 22.1%, and wholesale, retail and repair trade fell by 11.4%. On the other hand, activities linked to extractivism saw an upturn: mining and quarrying grew by 7.6% and electricity, gas and water by 11%.
Although Milei enthusiastically celebrated the data on her social networks, an analysis by the CEPA center reveals that excluding agriculture as an activity, the economy contracted by 5.5% compared to last year.
On the other hand, a report from the UIA this Wednesday confirms the data from Indec for May for the manufacturing sector. In the disaggregated, all branches fell except for oil refining, with non-metallic minerals and the automotive industry being the most affected by the recession with a year-on-year fall of 28.8% and 27.9% respectively. They also report a drop in the use of installed capacity in the industry of 11 percentage points, standing at 56.8%. That is, almost half of the industrial machinery is stopped. Finally, employment in the industry fell by 0.9% compared to last year, according to the UIA.
Confronting the government to break the vicious circle of recession
On Tuesday, the IMF worsened its forecast for a decline in economic activity in Argentina. Although the organization predicts a 5% rebound for 2025 (one of the most optimistic forecasts for the region), this would barely cover the 3.5% decline it predicts for this year, since it is based on a much smaller economy, that is, “growth” starts from a much lower base.
On the other hand, the recession brings with it a lower tax collection, which in order to achieve the fiscal balance (income minus expenditure) that the government wants and the IMF is asking for, requires an adjustment, an even greater spending cut. In other words, a vicious circle of adjustment, recession, more adjustment, more recession. In this sense, AFIP confirmed the worst drop in tax collection so far this year; in June the drop was 14% in real terms. According to IARAF calculations, the drop would have been greater, 17%, if the PAIS tax were not included.
In this regard, economist Guido Zack stated in Cenital that the new transfer of debt from the Central Bank to the Treasury could further complicate the vicious circle of recession, since the payment of the debt will have to be faced not with issuance by the BCRA, but with greater fiscal effort. “If in the first half of the year the budgetary balance was achieved with a great effort by society (the adjustment to the caste was an electoral story), in this second half and next year an additional effort will have to be made so that the Treasury can face the payment of this new debt (estimated at 1.2% of GDP per year) and other measures such as the reduction of the PAIS tax rate on imports from 17.5% to 7.5%.”
Zack concludes, “This implies less public spending, more taxes or a bit of each. In any case, it is a factor that will reduce the demand for goods and services, and with it the longed-for recovery will be delayed even more.”
The old IMF recipes for adjustment and austerity are already well known in Argentina, plunging us into ever deeper crises. Increased poverty, unemployment and job insecurity. On the other hand, businessmen have increased their share in the distribution of the income pie, that is, they are advancing by stealing a part of the work carried out by the working class that sustains their profits.
Greater coordination and unity of the workers is needed to confront Milei and the IMF. The only way out for the majority is to break with the IMF and the sovereign rejection of the debt scam, a program that breaks with capitalism and submission to the great powers.
Source: www.laizquierdadiario.com
