The Fiscal Council considers that the macroeconomic scenario based on the Government, built on a decline in real GDP by 1.9%, is a very optimistic one, and estimates the budget deficit of this year at about 7.3% – 7.45% of GDP, but in the event of a more severe contraction in economic activity, it could exceed 10% of GDP.
“The budget rectification occurs under the conditions of the announcement by the Government of extraordinary circumstances caused by the pandemic caused by the SARS-CoV-2 virus. The Fiscal Council validates the manifestation of these extraordinary circumstances and considers that the current situation requires a budget rectification which to support the fight against the pandemic and, on the other hand, to mitigate its economic and social impact (…) Judging by the available data, the Fiscal Council considers that the macroeconomic scenario created by the Government, which is built on a real GDP decline with 1.9%, is very optimistic (…) Based on the macroeconomic framework assumed by the Government, the Fiscal Council estimates the budget deficit of this year at about 7.3% – 7.45% of GDP, compared to the one forecast by the Government of 6.7%. Under the two additional scenarios considered, the likely level of the budget deficit is between 8.1% and 8.9% of GDP, considering a contraction of 4% – 6% of real GDP, reaching up to 9.9% – 10.4% of GDP in the situation of a more severe contraction of economic activity, of 8% – 9% in real terms”, says the Fiscal Council, according to Agerpres.
In the view of tax specialists and based on the analyzes of the National Institute of Statistics (INS) on the economic impact of the pandemic, the historical reference of the previous economic crisis that began in 2008 and other available data, “it is prudent and necessary to consider two more macroeconomic scenarios for the current year: one based on a contraction of real GDP placed in the range of 4% – 6%, and a scenario that predicts a more severe contraction of GDP, of 8% – 9%.”