Lloyd Dutton November 17, 2018

The Ministry of Finance released the fiscal data for October. And he affirmed that the primary deficit (that is to say without computing the interests of the debt) was reduced by 49%, which allowed for knotting 10 consecutive months of improvement, accumulating a deficit cut equivalent to 1.2% of GDP. The goal for this year is to reach a primary fiscal deficit of 2.7% of the Gross Product, which would be exceeding the target, which will make it easier to reach deficit 0 by the end of 2019.

The summary of the October data, according to the Treasury, is this.

● The primary result was reduced 49% year-on-year, which implies a 65% contraction in real terms. It was the result of the fact that, for the eleventh consecutive month, primary disbursements (not including interest payments on debt) increased below inflation, and that for the sixteenth month in a row, resources (discounting extraordinary items) increased above primary expenses. .

● Thus, the gap between the increase in income and primary expenditures exceeded 15 percentage points in October, well above that registered in the first three quarters (8 p.p.).

● The actual primary expense for the first seven months of the year is the lowest for a January-October period since 2012.

 ● In October, total revenues (+ 45.6% year-on-year) showed the highest growth in 19 months; the dynamics of tax resources (+ 38.5% i.a.) explained almost 80% of the improvement.

● The dynamics of the resources coming from the collection were mainly due to higher VAT revenues (+ 58% i.a.), credits and debits (+ 79% i.a.) and export duties (+ 296% i.a.). In the opposite direction, the resources operated by Profits that grew well below the collection of this tax (+ 1.4% i.a. vs. + 31% i.a.), product of the changes introduced by the Fiscal Pact in favor of the Provinces.

● In turn, in October income from property rents grew 224% i.a., especially those entered into the Treasury (+ 1624% i.a.) due to the management of availabilities of pesos in the current context of interest rates.

 ● On the other hand, primary expenses increased 30.4% in October, highlighting the dynamics of subsidies (+ 73.9% yoy), especially energy (given the impact of the increase in the exchange rate), and the capital expenditures (+ 42% yoy).

● The latter showed both the highest rise and the highest level of the year, especially for the Transport sector (+ 132.8% yoy), Education (+ 86% yoy), Energy (+ 75.7% yoy), Drinking water and sewerage (+ 64.7% yoy) and Housing (+ 64.9% yoy).

● Social benefits increased 23% i.a., which although it is below the increase in total primary expenditure, in the ten months of the year they expanded by 6 p.p. above and increased their participation within the total by 2.8 p.p.

● Interest grew in October due to the impact of the rise in the exchange rate and the rise in interest rates. In any case, the total expenditure of the NFPS fell again in real terms (-3.7% i.a.), and the financial deficit fell by 13.3 percentage points after discounting inflation.

● In fact, in the first ten months of the year, the financial result fell by 18.9% year-on-year in real terms, and 0.7 p.p. in terms of GDP.

● Also contemplating the Priority Investment Program, which in the first ten months accumulated $ 30,213 million (0.2% of GDP), the primary result computable for the goal established in the Stand-By agreement with the IMF reached 1.5% of GDP in October. It should be remembered that the goal for the whole year amounts to 2.7% of GDP.

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