Itaú BBA - ARGENTINA – Weak activity affects fiscal balance in January

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ARGENTINA – Weak activity affects fiscal balance in January

Fevereiro 27, 2020

Total revenues decreased by 8.2% yoy in real terms in January, dragged down by a weak tax collection

A return to fiscal deficit in January.  The treasury ran a primary deficit of ARS 3.8 billion in January, compared with a surplus of ARS 16.7 billion in the same month of 2019. We estimate that the 12-month rolling primary deficit as of January ticked up to 0.5% of GDP, from 0.4% in December 2019. The nominal deficit, which includes interest payments, is estimated at 3.6% of GDP.

Drop in tax collection. Total revenues decreased by 8.2% yoy in real terms in January, dragged down by a weak tax collection (-9.4% yoy, adjusted by inflation). VAT collection fell by 19.2% yoy and social security collection decreased by 10% yoy in real terms, while export duties rose by 4.5% yoy on a higher tax rate for primary products. Primary expenditures fell by 1.5% yoy in real terms, led by a decrease in capital expenditures (-57.6% yoy), wages (-11.9%), and pensions (-5.6%).  This reduction in expenses was partially offset by higher energy subsidies (47.5%), transfers to provinces (19.5%), social benefits and food cards (271%).

We forecast a primary deficit of 0.4% of GDP for this year. Higher export taxes, the suspension of scheduled tax cuts on corporate income and payroll, and new taxes on dollar purchases (savings, credit cards, travel, etc.) will likely keep the federal primary balance unchanged this year relative to 2019. Risks are still tilted to the downside, given that the new formula for tariff adjustments has yet to be announced and that the impact of energy subsidies could be significant following the temporary freeze.

Juan Carlos Barboza
Diego Ciongo

 



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