Itaú BBA - ARGENTINA – Primary fiscal deficit narrowed in November

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ARGENTINA – Primary fiscal deficit narrowed in November

December 22, 2020

We see downside risk to our primary deficit forecast of 6.9% of GDP this year

The recovery of tax revenues and some moderation of expenditures helped to reduce the fiscal deficit. The treasury ran a primary deficit of ARS 58.7 billion in November, posting the lowest reading since the beginning of the pandemic. One year ago, the treasury posted a deficit of ARS 6.4 billion in November. As a result, we estimate that the 12-month rolling primary deficit reached 6.0% of GDP, while the nominal deficit hit 8.4% of GDP in November.

Tax collection is falling by less, reflecting the evolution of activity. Tax collection was down 1.4% yoy in real terms for the quarter ended in November (-5.4% yoy in 3Q20), in line with the improvement in activity as social distancing measures are eased. Total revenues (including non-tax revenues) dropped 5.0% yoy in real terms in the same period, from -10.7% yoy in 3Q20.

Expenditures decelerated in real terms due to slowing spending with extraordinary social programs. Primary expenditures rose 13.8% yoy in real terms in the quarter ended in November, below the increase posted in 3Q20 (16.5% yoy). Special programs to assist workers and companies increased 290% yoy (from 557% in 3Q20), while transfers to provinces expanded 19.6% yoy, from 33.4% yoy in 3Q20. On the other hand, Transport and energy subsidies increased 70.5% yoy in the period, up from 32.7% yoy in 3Q20, led by transfers to CAMMESA (the wholesale electricity-market clearing company). Payroll expenses fell 9.0% yoy (from -8.4% in 3Q20), while pension payments decreased 1.4%, after falling 2.2% in 3Q20. Finally, capital expenditures dropped 11.0%, after falling 19.9% yoy in 3Q20. 

We see downside risk to our primary deficit forecast of 6.9% of GDP this year (-0.4% of GDP in 2019). For 2021, we forecast a primary deficit of 4.5% of GDP due to the expected recovery in revenues, the additional income linked to tax on large fortunes, the scaling back of social programs related to COVID-19 and an adjustment in tariffs.



Juan Carlos Barboza
Diego Ciongo

 

 

 



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