Government's financial plan is 'not credible' and must cut $32 trillion: Carf
The Autonomous Fiscal Rule Committee (Carf) warned that the fiscal scenario presented by the Government in the 2026 Financial Plan lacks clear mechanisms to guarantee spending cuts, considering the plan 'not credible'.
TL;DR
- The Carf estimates a fiscal shortfall of $32.1 trillion (1.6% of GDP) for meeting the 2026 fiscal target.
- The government's plan to reduce the primary deficit to 2.1% of GDP in 2026 is considered 'not credible' by Carf due to absent spending cut mechanisms.
- Without adjustments, public debt may grow, compromising fiscal sustainability and macroeconomic stability.
- Carf projects a primary deficit of 3.7% of GDP in 2026 under its base scenario, leading to a total deficit of 6.7% and net debt of 60.3% of GDP.
- Achieving the 2027 primary deficit target of 0.3% of GDP would require a significant 3.4% of GDP fiscal adjustment in a single year.
- Factors like minimum wage increases, labor reform, and pension reform could impact public accounts.
- Signs of economic overheating, including high domestic demand growth and persistent inflation, suggest that the government's expansive fiscal policy in 2025 might be inappropriate.
- Stabilizing public debt requires a significant fiscal adjustment of 3.5% to 4.5% of GDP.
- Carf emphasizes the necessity of structural reforms for permanent revenue increases or spending reductions.