Mulino's cabinet is set, but the composition of the legislative Assembly is in doubt. Fiscal weakness and slow growth are challenges for the next administration.
With less than six weeks to go until the new National Assembly is installed (and 25 days after the general elections on May 5), we still do not know the Assembly's definitive political composition. This uncertainty is mostly due to the strategy by a group of losing candidates and parties from the Mulino/Martinelli camp of contesting the results to reduce the opposition's number of seats in the legislative body at the beginning of the term, so that votes for the key positions in the Assembly will take place with more votes from parties aligned with the government. Sixteen out of 71 seats have been contested, and this number changes daily. Some cases have been resolved, but it's likely that on July 1, when the Assembly's leadership is established (specifically its President and Secretary General), the number of ratified deputies will be less than the 71 required by the Constitution, facilitating the election of Assembly leaders with more votes from parties potentially aligned with the government.
The fiscal balance for the first quarter confirms the difficulty of meeting the 2% fiscal rule deficit in 2024 as stipulated in the Fiscal Social Responsibility Law. Without implementing a fiscal consolidation plan, we expect the deficit to be around 4.6% of GDP by year-end. In March, the Monthly Economic Activity Index (IMAE) contracted by 2.1% and grew by 0.04% during the first quarter, indicating the challenge of achieving the 2.5% growth forecast by most analysts.
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