2026/06/17 | Diego Ciongo & Soledad Castagna
The primary surplus amounted to 0.7% of GDP in the first five months of the year, while the nominal fiscal balance, including interest payments, registered a surplus of 0.2% of GDP. Both figures are broadly in line with those recorded in the same period of 2025.
Real tax revenues declined in the quarter ended in May, but at a slower pace than 1Q26. Total real revenues fell by 3.9% YoY in the period, following a 5.1% contraction in 1Q26. Real tax collection declined by 4.0% YoY during the quarter, better than the 8.0% drop observed in the first quarter. The weak performance continues to reflect the impact of lower export duties, VAT and income tax, likely associated with still‑soft domestic consumption.
Primary expenditures continued to fall. Real primary expenditures declined by 2.0% YoY in the quarter ended in May, from a 5.1% contraction recorded in 1Q26. Public sector payrolls fell by 4.4% YoY (‑8.2% in 1Q26) helped by the recent deceleration of inflation. Transfers to provinces dropped sharply, down 56.0% YoY (‑38.4% in 1Q26). By contrast, energy subsidies increased by 23.4% YoY in real terms, following an 83.8% expansion in 1Q26 affected by a base effect. Moreover, capital expenditure rose by 5.0% YoY, following a 25.9% fall in the previous quarter, while pension spending rose by 2.3% YoY in real terms (+2.2% in 1Q26).
Our Take: Our 2026 primary surplus forecast stands at 1.5% of GDP, in line with the official target outlined in the 2026 Budget. The outlook continues to be underpinned by disciplined fiscal execution, despite ongoing pressures on the revenue side. The MoF is scheduled to release June fiscal data on July 16.