Itaú BBA - ARGENTINA – Fiscal deficit worsened in August but at a slower pace

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ARGENTINA – Fiscal deficit worsened in August but at a slower pace

September 22, 2020

Our forecast for the primary fiscal deficit this year stands at 6.9% of GDP (from 0.4% in 2019),

The 12-month rolling primary fiscal deficit widened in August but at a slower pace, mostly due to a rebound in tax revenues and deceleration in expenditure growth. We estimate that the deficit as of August increased to 5.1% of GDP, from 4.8% in July. The treasury ran a primary deficit of ARS 89.5 billion in August, compared with a surplus of ARS 13.7 billion for the same month in 2019. The 12-month rolling nominal deficit reached 7.8% of GDP in August.


Tax collection continued to decline on a year-over-year basis due to activity that was still weak. Tax collection was down 10.3% yoy in real terms in the quarter ended in August, compared with -20.2% in 2Q20, as VAT collection improved and the government collected more in tax-per-dollar purchases. A base effect supported tax revenues because the income and wealth taxes, usually collected in 2Q20, were postponed until August. Total revenues (including non-tax revenues) dropped 18.2% yoy in real terms in the same period, from -24.8% in 2Q20.

Increase in expenditures decelerated in the quarter ended in August. Primary expenditures rose 15% yoy in real terms in the quarter ended in August, down from 30.6% yoy in 2Q20. Special programs to assist workers and companies during the lockdown led to the expansion of total expenditures (+667% yoy from +815%, respectively). Payroll expenses continued to decline (-12.2% yoy in the quarter ended in August, from -10.8% yoy in 2Q20), while pension payments edged down 0.5% yoy, after increasing 2% yoy in 2Q20.  Transfers to provinces grew 28.7% yoy in August, down from 330.4% yoy in 2Q20. Finally, energy and transport subsidies came in at 6.5% yoy in real terms, down from 64.3% yoy in 2Q20. 

Our forecast for the primary fiscal deficit this year stands at 6.9% of GDP (from 0.4% in 2019), assuming a gradual sequential recovery of activity and some reduction in spending with special programs during the pandemic.



Juan Carlos Barboza
Diego Ciongo



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