What are the factors that would contribute to its reduction?

What are the factors that would contribute to its reduction?
What are the factors that would contribute to its reduction?

In natural gas, the savings would be US$ 0.6 per MBTU (close to 20%), mainly due to the drop in supply costs.

In this framework, and assuming relatively constant values ​​for demand, subsidies would represent 1% of GDP in 2024 (US$ 6.4 billion), with a saving of 0.5 points of Product, the consulting firm estimated, which clarified that this amount also includes decision of the Government to pay the debt that was generated with the gas generators and producers in December 2023 and January 2024 through a bond maturing in 2038, postponing expenditures of US$530 million.

This month, the Government announced that will unfreeze rates for natural gas and residential electric energy with the aim of contributing to the reduction of the fiscal deficit, after last year energy subsidies represented 1.5% of GDP.

The tangle of subsidies

The report recalled that in recent years and due to the lack of updated rates, many electricity distributors have stopped paying the administrator CAMMESAgenerating a debt that has been partially covered with more subsidies.

“This operation, which significantly increased transfers from the Treasury to CAMMESA in 2020-2023, would be reduced this yearafter the strong increase in the distribution segment,” MAP pointed out.

At the same time, he explained that the increases announced in most cases barely cover the deterioration that prices suffered during 2023 and until March 2024, due to having been fixed in pesos; In fact, the full price in dollars is still lower than the one in effect a year ago.

Eye on production

Forward, The consulting firm considered that the reduction of subsidies will largely depend on what may happen to production and generation costs..

“As a result of lower fuel prices and, fundamentally, Due to greater gas availability, the system supply costs this year would be lower than in 2023“, he evaluated.

In another order, MAP estimated that there is a 50% probability that the Government will implement a comprehensive and consistent stabilization plan, which will lead to a recovery and disinflation process, in the second half of this year.

However, he warned: “the political and social viability of the provisions adopted and to be taken remains to be seen.” Consequently, he projected an inflation rate of 146.8% year-on-year next December.

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