The CED projected a 3.3% growth of the economy for this year as a “floor” due to the “carryover effect” of the good numbers of the last quarter of 2021 published yesterday and that will be created 30 thousand new jobs. In addition, it estimates that the tax reduction of IRPF and IASS that President Luis Lacalle Pou announced for 2023 it would imply a waiver for the state coffers of some US$500 million if it were equivalent to reversing the last tax adjustment made during the previous administration (2017).
The director of thinktank Agustín Iturralde said at a breakfast at the Punta Carretas Golf Club this Thursday that fiscal management was the main achievement of the government. Apart from maintaining the investment grade, the management of economic policy removed the “Macri risk” because the country is well off in the face of an increase in interest rates at the international level that make the financing of the country more expensive, he examined.
Due to high inflation, The US is raising its interest rates, which increases the cost of borrowing for other countries (Uruguay would have to pay higher interest to cover its deficit with public debt). According to Iturralde, the world’s leading economy is in “real danger of spiraling into prices and wages” and “could enter a recession next year.”
In relation to salaries, the analyst considered that “there is room for salary recovery” although “it should be a fine tuning job” so as not to affect the good employment numbers. However, “it is difficult for there to be a salary recovery this year with these guidelines and this inflation,” he said.
The study center estimated a inflation around 7.5% by 2022. The annualized figure for February was 8.85% and, according to Iturralde, “it will accelerate for a few months” before beginning to drop.
Diego Battiste
Iturralde considered that “there is room for salary recovery” although “it will have to be a fine tuning job”.
On the GDP data published this Wednesday by the Central Bank —which showed a growth of 4.4% in the past year— the economist maintained that it was a confirmation that “the recovery was much faster than we all believed (by economic analysts)” and that the novelty was the recovery of consumption.
Unlike real household income, consumption has not yet reached pre-pandemic levels. Iturralde interpreted that the first is rather tied to the level of employment while the second is linked to a greater extent to wages.
On the other hand, the analyst stressed that the wage bill grew after 4 years and that —when the INE publishes the information next week— there will be a poverty reduction for the first time in 2021.
The tax waiver for lower taxes
In his dissertation, the director of the CED referred to the Proposition of President Lacalle Pou on reducing the IASS and increasing the deductions allowed in the lowest bands that pay IRPF.
From the think tank they calculated how much it would cost the public treasury annually if —hypothetically— the last fiscal adjustment of 2017 on those two taxes was reversed. The resignation of public accounts would exceed US $ 500 millionapproximately US$ 80 million for IASS and another US$ 450 million for personal income tax.
In addition, from the CED they argued that a “permanent tax waiver should not be financed with transitory revenues per business cycle“.
President Lacalle Pou got engaged on March 2 in his speech before the General Assembly to reduce next year the Social Security Assistance Tax (IASS), which is levied on the highest pensions, and the Personal Income Tax (IRPF) that pay a third of wage earners, if the economy manages to grow this year at least at the rate of 3.8% that the economic team manages and that today several private analysts do not see as an impossible number to reach.
“We have a firm commitment to comply with what was agreed in the Commitment for the country, to obtain satisfactory results in the economy, to reduce the IASS and to increase the deductions in the lowest income tax brackets in the year 2023”, announced the president. Lacalle Pou in Parliament.
