Argentina’s treasury ran a primary deficit of ARS 334.4 billion in July, substantially above the deficit of ARS 76.0 billion one year earlier. We estimate that the 12-month rolling primary deficit increased to 2.8% of GDP in the quarter ended in July, up from 2.4% at the end of 2022.
Tax revenues fell in the quarter ended in July, led by lower trade-related taxes and income tax revenue. Tax collections fell by 4.4% yoy in real terms in the period, from -5.0% in 2Q23, mostly due to lower export and import taxes, which, in turn, reflected the effects of a severe drought and import controls, respectively. Total revenues decreased by 4.6% yoy in the period (-7.1% yoy in 2Q23).
Primary expenditures declined in real terms in the quarter ended in July, but at a slower pace than in June, due to a hefty expansion of social expenditures and transfers to provinces in July. Primary expenditures fell by 2.4% yoy in real terms in the quarter ended in July, compared with a 6.2% drop in 2Q23. Pension payments were down by 7.7% (vs. -8.3% in 2Q23), while expenses on social programs fell by 13.9% yoy, from -25.4% in 2Q23. Similarly, transfers to provinces declined by 6.9% (-25.6% in 2Q23) in the context of the final run-up to the presidential primary election. Energy subsidies decreased by 6.9% compared with an increase of 12.7% in 2Q23, while transport subsidies increased by 2.6% in the period from a drop of 21.1% in 2Q23. Finally, payroll payments increased by 6.3% yoy in real terms (as in the previous quarter), while capital expenditures were up by 29.3% yoy (compared with an increase of 14.8% in 2Q23), mainly due to the construction of the Nestor Kirchner gas pipeline.
We forecast a primary deficit of 3% of GDP for this year, below the 1.9% target agreed with the IMF for 2023.