In terms of GDP, we estimate the deficit remains at 3.9%.
The primary balance remained almost unchanged from a year earlier. The treasury posted a primary surplus of ARS 3.9 billion in January, from ARS 3.6 billion in the same month one year before. As a consequence, the 12-month rolling primary balance posted a deficit of ARS 403.8 billion in January, from ARS 404.1 billion in the previous month. In terms of GDP, we estimate the deficit remains at 3.9%.
Solid revenue growth supports fiscal results. Total revenues grew 19.3% YoY in January; however, excluding the one-off penalties collected in 2017 as part of the tax amnesty program, revenue growth was 27.7%. Primary expenditures rose 19.5% YoY, as higher pension payments (35.1%), social benefits (28.8%) and wages (20.4%) were partly offset by a 40.1% reduction in capital expenditures. Subsidies increased by just 1.9% YoY in January. In real terms, primary expenditures fell by 4.4% and total revenues dropped by 4.6% (an increase of 2.2%, excluding the above mentioned extraordinary revenues).
We expect the government to meet the fiscal deficit target this year. Last year, the treasury posted a deficit of 3.9% of GDP, 0.3% lower than the official target of 4.2%. The government’s goal is to reduce the primary deficit to 3.2% of GDP this year. Excluding tax-amnesty revenues in 2018, this would imply a fiscal deficit reduction of 1.1% of GDP. In our view, the recent changes in the pension-adjustment formula, continued efforts to slash subsidies and higher tax collection due to the expected economic recovery will play a key role in achieving further fiscal consolidation.