Argentina’s treasury ran a primary deficit of ARS 330.3 billion in October, substantially wider than the deficit of ARS 129.1 billion posted one year earlier. We estimate that the 12-month rolling primary deficit increased to 2.6% of GDP in the quarter ended in October from 2.4% of GDP in 3Q23.
Tax revenues fell in the quarter ended in October, led by lower trade-related taxes and income tax revenue. Tax collections fell by 6.6% yoy in real terms in the period, unchanged from 3Q23 mostly due to lower export taxes, which reflected the persistent effects of the severe drought. Total revenues also decreased by 6.6% yoy in the period (-8.2% yoy in 3Q23).
Primary expenditures declined in real terms in the quarter ended in October, mostly due to lower energy subsidies. Primary expenditures fell by 4.4% yoy in real terms in the quarter ended in October, compared with a 3.4% yoy drop in 3Q23. Pension payments were down 8.4% yoy (-6.8% yoy in 3Q23), while capital expenditures dropped by 14.3% yoy in the period (-3.6% yoy in 3Q23). Energy subsidies decreased by 45.8% yoy, compared with an increase of 41.7% yoy in 3Q23. On the other hand, and in the context of a fiscal package announced for the final run-up to the general presidential election, expenses for social programs rose by 52.4% yoy, transfers to provinces grew by 26.6% yoy and payroll payments increased by 5.2% yoy in real terms.
Our primary fiscal deficit projection for this year stands at 3.5% of GDP. The fiscal package of around 1.3% of GDP implemented after the primary elections should deteriorate the fiscal accounts in the coming months. Looking ahead, the president-elect Javier Milei has advocated for a strong fiscal adjustment, pushing for a limited size of the state, amid a likely new program with the IMF. In our view, the fiscal consolidation should begin with discretionary items, like capital expenditures and subsidies after an expected correction of tariffs. Thus, we expect a gradual fiscal consolidation for 2024, leading to primary deficit of 1.0% of GDP.