Budget cut seen as realistic fiscal effort
The $18 billion budget cut announced Thursday (Feb. 20) by the economics panel has been met positively as a realistic fiscal effort target. Economists told Agência Brasil that the primary surplus (saving up for costs with public debt interests) target of 1.9% of Gross Domestic Product (GDP) is consistent with the low economic growth expected for 2014, which has been lowered to 2.5%.
According to Felipe Salto, an economist with Tendências consultancy, the announcement has created more transparency in public accounts despite the government's admission that it will not fully meet the target. “Even if the government does miss its expenditure target, this is a positive sign in that it sets a clear, more realistic goal amid widespread skepticism of the government's ability to accomplish it,” he says.
According to Salto, the total national, state, and local primary surplus is expected to fall down to somewhere in between 0.6% and 0.8% of GDP excluding windfall profits such as concession contracts and public corporation dividends. Still, he regards this a positive figure. “In 2013, the primary surplus was 0.6% of GDP before unexpected proceeds. Hopefully this year the government has committed to greater savings, which helps keep inflation down,” he said.
Professor Francisco Lopreato, Institute of Economics, University of Campinas (Unicamp), lauded the primary surplus target as appropriate for the current economic stagnation. “The positive thing is that fiscal effort planned for this year will still allow for public debt reductions,” he pointed out.
According to the professor, an expert in public sector accounts, the government's mistake over the past years is not that they lowered taxes and increased spending to stimulate the economy, but that they were not transparent about it. “I'm not particularly opposed to the counter-cyclical policy [when the government spends more in times of crisis], but government trust has been lost when they weren't clear about their primary surplus targets at the beginning of each year. Now I guess they have learned their lesson so they won't have issues with the market,” he said.
According to the Ministers of Finance, Guido Mantega, and Planning, Miriam Belchior, both the tighter stance and the primary surplus target are based on conservative government revenue growth expectations. Lopreato views this as a government attempt to avoid a collapse of trust in its public account performance ahead of the elections. “The government now wants to make a positive impact. If the country grows more than expected, the government can save more and avoid criticism,” he says.
Translated by Mayra Borges
Fonte: Budget cut seen as realistic fiscal effort
