ARGENTINA – Fiscal deficit improved in September, helped by extraordinary revenues

Juan Barboza & Diego Ciongo


The Treasury ran a primary surplus of ARS 291.4 billion in September, up from a deficit of ARS 167.2 billion a year earlier, helped by the registration of the SDR allocation granted by the IMF (ARS 427.4 billion). We estimate that the 12-month rolling primary deficit fell to 1.5% of GDP (2.5% excluding SDRs), from 2.6% in August. The cumulative nominal deficit as of September fell to 3.0% of GDP (4.1% excluding the SDR allocation), down from 4.1% in the previous month.

Tax collection continued to recover in 3Q21. Tax revenues increased by 9.1% yoy in real terms in 3Q21, but they were down from 24.6% in the previous quarter, as the annual base comparison effect fades (strict lockdowns in the same period during 2020). Total revenues (including IMF proceeds) jumped 33.0% yoy.

Primary expenditures in real terms fell slightly as rising subsidies offset declines in pensions and the reduction of COVID-19 programs. Primary expenditures decreased by 1.3% yoy in real terms in 3Q21, from -15.8% posted in the quarter ended in June. COVID-19-related program expenditures fell by 51.5% yoy, while pension payments decreased by 4.4% yoy, affected by the acceleration of inflation. Transfers to provinces fell by 15.2% yoy. On the other hand, there was a sharp increase of 43.9% yoy in energy and transportation subsidies and a 23.1% increase in capital expenditures in the same period. Payroll expenses gained 6.6% yoy in 3Q21, reflecting the annual wage adjustment.

We expect a deterioration of the fiscal accounts in the coming months, following the decision to speed up expenditures after the defeat of the ruling coalition in the primary elections in mid-September. We expect the increase in the deficit to be financed by the central bank, feeding further inflation. We adjusted our forecast for the primary fiscal deficit downward, to 2.5% of GDP from 3.5% due the registration of the SDRs as non-tax revenues.

Juan Carlos Barboza
Diego Ciongo