Argentina’s treasury ran another primary surplus in February, reaching ARS 1,232.5 billion, up from the deficit of ARS 228.1 billion posted one year earlier. The nominal fiscal balance stood at ARS 338.1 billion, from a deficit of ARS 485.6 billion in the same month one year ago. We estimate a sharp decline in the 12-month primary deficit to 0.7% of GDP (from the 2.9% estimated for 2023), while the nominal fiscal balance fell to -2.9% of GDP (from -4.7% in December).
Tax revenues continued falling in real terms in the quarter ended in February. Tax collection fell by 8.4% yoy in real terms in the period, after dropping by 11.7% in 4Q23 amid weak activity. Total revenues also decreased by 8.4% yoy in the period (-7.7% yoy in 4Q23).
Primary expenditures plummeted in real terms in the first two months of the year. Primary expenditures fell by 28.2% yoy in real terms in the quarter ending in February, compared with a 3.7% yoy drop in 4Q23. Pension payments were down 33.9% yoy (-16.9% yoy in 4Q23), while payroll decreased by 10.0% yoy in real terms (+11.0% yoy in 4Q23), both affected by the sharp acceleration of inflation. Capital expenditures plummeted by 73.1% yoy in the period (-21.0% yoy in 4Q23) due to the freeze of public works. Energy subsidies decreased by 14.9% yoy, compared with a drop of 10.4% yoy in 4Q23. On the other hand, expenses in social programs fell by 19.5% yoy, while transfers to provinces dropped by 33.8% yoy.
We expect a balanced primary fiscal account (0% of GDP) in 2024, below the official forecast of a surplus of 2.0% of GDP. Although the beginning of the year is promising for fiscal accounts, maintaining steep expenditure contractions to achieve a primary surplus appears challenging in a stagflationary scenario.