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Zero deficit budget will face opposition in Argentina

Wednesday, September 25, 2024

Significance

The draft reaffirms the ‘zero deficit’ that remains the cornerstone of government economic policy, and a small surplus is forecast for 2025. Though some expenditure items, such as social security and capital spending, will rise somewhat after this year’s severe cuts, energy subsidies will be slashed, undermining government expectations of a sharp fall in inflation.

Impacts

  • While public opinion has thus far supported fiscal discipline, all recent polls show that Milei’s support is falling amid economic concerns.
  • Exchange rate forecasts for 2025 suggest that the government will not lift capital controls in the short term.
  • If Congress does not pass the budget, the government would extend the current budget, leaving more room for discretionary spending.

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