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The effects of the stabilization package are expected to be reflected in the following prints.
2023/12/21 | Andrés Pérez M. & Diego Ciongo

Argentina’s treasury ran a primary deficit of ARS 210.5 billion in November, virtually unchanged from the deficit of ARS 227.8 billion posted one year earlier. We estimate that the 12-month rolling primary deficit decreased to 2.0% of GDP in the quarter ended in November from 2.4% of GDP in 3Q23.

Tax revenues fell in the quarter ended in November, led by lower trade-related taxes and income tax revenue. Tax collection fell by 9.8% yoy in real terms in the period, after falling 6.6% in 3Q23 mostly due to lower export taxes, reflecting the persistent effects of the severe drought. Total revenues also decreased by 6.4% yoy in the period (-8.2% yoy in 3Q23). 


Primary expenditures declined in real terms in the quarter ended in November, mostly due to lower energy subsidies. Primary expenditures fell by 3.5% yoy in real terms in the quarter ended in November, compared with a 3.4% yoy drop in 3Q23. Pension payments were down 12.1% yoy (-6.8% yoy in 3Q23), while capital expenditures dropped by 3.8% yoy in the period (-3.6% yoy in 3Q23). Energy subsidies decreased by 56.9% yoy, compared with a drop of 41.7% yoy in 3Q23. On the other hand, in the final run-up to the general presidential election, expenses in social programs rose by 58.7% yoy, transfers to provinces grew by 32.9% yoy and payroll payments increased by 6.0% yoy in real terms.

The effects of the stabilization package are expected to be reflected in the following prints. The government is implementing a sharp fiscal adjustment of around 5.2% of GDP, aiming for a balanced nominal fiscal balance in 2024. The guidelines provided by the ministry of finance point to a focus primarily on adjustment through expenditure cuts, and less so from revenue measures. On the expenditures side, energy and transport subsidies will be reduced, capital expenditures will be frozen, and transfers to provinces will be the main areas of adjustment. On the other hand, revenue measures include higher taxes on imports and exports, the reversal of the recent income tax reform and a tax amnesty, among others.

We expect a faster fiscal consolidation than our previous scenario for 2024, leading to a balanced primary fiscal account (0% of GDP, from -1.0% in our previous scenario), but less ambitious than official estimates that point to a balanced nominal fiscal deficit (the debt interest bill totalizes around 2.2% of GDP). In our view, the program shows a roadmap towards consolidation, yet implementation is likely to be challenging, considering that more than a half of primary expenditures are related to pensions and social assistance, which seem especially hard to cut under the current stagflationary outlook.