Benefiting from an unusual context of political stability (which we expect to continue) and positive investor sentiment, the economy continues to perform decently, with help from increasing public investment spending.
Yet, having not used the high GDP growth from 2021-22 to accelerate deficit reduction, the government finds itself in an uncomfortable budgetary position.
Sticking to the 4.4% of GDP budget deficit target this year is proving more than just challenging, as public wage requirements are catching up after two years of high inflation, while budget revenues are not increasing as planned.
Historically, cutting investments was the general solution to stick within the deficit, hence we do not exclude this option. And this is just for 2023 budget. Moving lower to a 3.0% of GDP deficit in 2024 as per current strategy looks very ambitious to say the least.
