OPINION – Beyond numbers

News at the beginning of this month was, in general, less encouraging that many had hoped. Topping them all, came the near-catastrophic figures in gambling revenues. For a second month, casinos scored about 5 per cent of their pre-pandemic values.

These figures raise a considerable concern about both the timing and the speed of an eventual recovery. Borders are still deserted, and there is no clear indication about when and how they will come back to life. 

The recently approved public budget had implicit a GDP forecast at about half the 2019 size. Usually, the government errs on the lower side and underestimates the public income – derived, in no trivial amount, from the casino activities, if it needs remembering.

It will take the remaining months of the year with revenues above 70 per cent of last year only to get around that target.  That is becoming unlikelier by the day. If things do not change fast, for once, the administration may find itself overestimating revenue.

These are not numbers without consequences. The short-term measures are taken by the government to support private demand only provide a buffer for the initial shocks, not a basis for a sustainable recovery. Reality will sooner or later intrude more forcefully in this sort of suspended animation. 

Further, the economic impetus induced by those measures on private expenditure is likely to be diminished by a decrease in public consumption. The current budget is similar in size to the previous one.

As a matter of mere arithmetic, if the total public expenditure is the same, the amounts transferred to the residents will impose equivalent reductions in public expenses. A contraction in public demand will then subdue the expansion effects of the subsidies granted. Even more so, if promised increases in public investment are confined within the same financial envelope. 

For that not to happen, a more significant recourse to the financial reserves will be necessary. That seems to go against the government’s intentions. It signalled to the public services its determination to reduce general expenses, suggesting a commitment to minimize the repercussions on the financial reserves.

If the economy recovers speedily – which implies reviving the borders, the sooner, the better – these effects may be softened. We have the means to monitor and control the flow of visitors and minimize the associated risks. The continuation of closed borders is becoming a greater menace. It threatens a loss that not even the region’s deep pockets can balance.