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23/06/2023 | Juan Carlos Barboza & Diego Ciongo

Argentina’s treasury ran a primary deficit of ARS 247.7 billion in May, compared with a deficit of ARS 191.5 billion one year earlier. We estimate that the 12-month-rolling primary deficit stood at 2.5% of GDP in May, unchanged from 1Q23 and slightly above where it was at the end of 2022 (2.4% of GDP). 


Tax revenues fell in the quarter ended in May due to lower trade-related taxes and income tax revenue. Tax collections fell by 9.0% yoy in real terms in the period, greater than the 9.1% decline posted in 1Q23, due mostly to the declines in export and import taxes, which reflected a severe drought and import controls, respectively. Total revenues decreased by 14.2% yoy in the period (-11.7% yoy in 1Q23).

Primary expenditures also declined in real terms during the quarter ended in May, led by a drop in energy subsidies and social programs. Primary expenditures fell by 11.2% yoy in real terms in the period, compared with a 6.0% drop in 1Q23. Energy subsidies decreased by 24.9%, compared with a decline of 44.9% in 1Q23, while expenses on social programs fell by 16.1% yoy, significantly below the increase of 65.8% in 1Q23. Transfers to provinces declined by 31.2% vs. a 19.0% drop in the first quarter of the year. Pension payments were down by 8.3% (vs. -6.8% in 1Q23), while payroll payments increased by 9.0% yoy in real terms (from 7.6% in the previous quarter). Finally, capital expenditures were up by 17.0% yoy (compared with an increase of 36.9% in 1Q23), mainly due to the construction of the Nestor Kirchner gas pipeline. 


We forecast a primary deficit of 3% of GDP for this year, which is worse than the target agreed upon with the IMF for 2023.