While analyzing the fiscal cost of official measures, some analysts are already projecting what the cost of the pandemic will be
The coronavirus is ravaging the world over. On the one hand, with a number of infected that grows exponentially, and that threatens to continue increasing the number of deaths. And on the other, with an evident impact on the economy of all countries, the product of a global landscape never seen before.
In this sense, economists and consultants have already begun to project the impact it will have on the country’s Gross Domestic Product, which accumulates years of a deep recession.
The first to put a number on the impact of the coronavirus on the Argentine economy were the economists from the consulting firm Elypsis, who forecast a 2.6% red in GDP due to the effect of the pandemic.. With that burden, the projections that they handle for all of 2020 are of a fall of 4.5%.
“This health emergency finds Argentina in the midst of a financial and economic crisis, with no resources to face it,” highlights the consultant led by Eduardo Levy Yeyati in his latest report. Therefore, he adds, “quantifying the impact is premature, but according to our projections the GDP will be retracting 4.5% this year, and 2.6 points of that fall is a consequence of the Covid-19”.
To reach this number, the consultant’s economists decomposed the impact by sectors and components of global demand and supply, but they do not publicly disclose the detail of what they expect for each sector, something that remains for their clients.
The Elypsis team summarizes in that report that Argentina is experiencing three simultaneous crises: health, financial and economic with a sharp drop in production, social impacts that must be addressed in real time, and fiscal impacts that will set the pulse when the Covid-19 passes.
Tax cost of the measures
The report analyzes in detail the fiscal cost of the last measure announced by the Government, of an Emergency Family Income of $ 10,000 for some 3,674,678 families. “The government will inject $ 37 billion in April in subsidies to the self-employment segment, one of the most affected by the quarantine and excluded from last week’s emergency measures,” he analyzes.
The consultant detailed that it was segmented by poverty rate and the impossibility of replacing the activity with telework and clarified that if the coronavirus does not subside (something very likely), in May the subsidy will be repeated.
Elypsis estimates the cost of the measure at $ 36,747 million if it is only one month, something unlikely after the advance of the coronavirus, he clarifies, and states that the cost will reach $ 73,494 million if it is repeated in May..
That, he adds, adds to the $ 22,500 million in three tranches that were given two days ago for 750,000 health workers, and the palliatives that still remain, especially for SMEs, where the payment chain is already resentful and will continue to fail in the following days.
After analyzing in detail the scope of the measure announced on Monday in the Olivos estate, the Elypsis report maintains that it is difficult in this context to take measures that do not leave out sectors in need or that include those who are not affected by the crisis.
In this sense, three criteria are glimpsed in this specific measure: serving a segment where poverty is estimated to exceed 65%, where the lowest property tenure rates are found, and which has no resources or possibility to implement other work modalities.
“Social stability”, a priority for the Government
The Economy Minister, Martín Guzmán, participated on Monday in a teleconference with his G20 peers, in which he asked deepen “global coordination efforts to preserve social stability”.
The official said there are three ways to address this need, among which he listed: providing money transfers; protect employment through work subsidies in sectors that are critically affected by the crisis; provide the extension of unemployment insurance.
“We will be able to face this crisis if we act decisively together,” Guzmán told the G20 finance ministers and central bank presidents who met via videoconference to analyze and seek coordinated solutions to respond to covid-19.
During the meeting, ministers shared their experience in response to the pandemic and agreed to develop an action plan with concrete economic measures to face the economic consequences of COVID-19 jointly.
The G20 is committed to decisively monitoring and taking action to slow the evolution of COVID-19, especially its impact on markets and the global economy.
At the meeting, Minister Guzmán argued that “the global market economy was not prepared to deal with the consequences of COVID-19”, at the same time that he asked to deepen “global coordination and cooperation efforts to preserve the social stability” of the countries. .
“On the economic front, what we face today is much more complex than a demand problem. We cannot and should not face this shock only with standard stimulus measures. The reason why people cannot go to work is that we need to reduce circulation to prevent the spread of the virus, “said Guzmán.
The minister maintained that “Argentina is ready to help the world navigate through these difficult times. We will be able to face this crisis if we act decisively together.”
Furthermore, he postulated that the global response should be based on five principles:
– The first principle is that health is the number one priority. Health is a global public good. To safeguard public health, we must reduce the movement of people and goods. This, of course, reduces economic activity. Consequently, we must take measures to guarantee the supply of essential goods and services.
– The second principle is that we must protect those who are left in a vulnerable situation. Changes in the composition of demand, without policy interventions, lead to desperate situations for many.
We must act decisively to avoid a social collapse.
– The third principle is that the policies must preserve the capital of the organizations -the own knowledge of the companies in activity-. This is different from protecting profits, or shareholders. How we handle this issue will be critical to avoid deepening inequalities that have done so much damage to the world.
– The fourth principle is that research to deal with the COVID-19 crisis must be a global public good. Research is essential and the medical and scientific knowledge that is generated by research must be made globally available at affordable prices.
– The fifth principle is that we need to use the complete economic policy toolkit to provide global liquidity. For example: there should be extensions of bilateral swaps (bilateral currency exchanges) with the most advanced economies, as well as increases in the Special Drawing Rights of the International Monetary Fund. This is a global emergency that requires strong and courageous global policies.
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