The “historic” agreements reached last week between the national and provincial governments need to be judged by their fiscal context as much as the actual contents and various indicators have emerged in recent days to shed light there. The most striking and positive of these figures was a 47-percent plunge in last month’s Treasury red ink as compared to the previous October but this was entirely due to a 49-percent fall in subsidies (65 percent in the case of the energy sector) in the same period. Thanks to these cuts, public spending rose by a mere six percent last month as against a 32-percent expansion of revenue with an October primary deficit of 32.5 billion pesos as the net balance.
This places the government comfortably within sight of this year’s fiscal deficit target figure of 4.2 percent of gross domestic product. Yet this sharp fall in last month’s deficit does not permit any wild optimism and not just because this trend can only be sustained while subsidy cuts continue. The dramatic improvement refers to the primary deficit but while that fell 47 percent last month, interest payments on public debt soared 88 percent as compared to the previous October.
Figures published last week showed public debt rising by US$18.34 billion at a daily rate of US$100 million in the first half of this year to reach US$293.78 billion or 53.7 percent of GDP. Moreover the improvement in revenue also reflected the continuing effects of the tax whitewash.
But there is also a brighter side to this picture. For now the economy is growing faster than debt (October growth was 5.5 percent according to private estimates) thus causing debt to dip slightly from 54.2 to 53.7 percent of GDP between the second half of 2016 and the first half of this year (foreign debt is quantified at 36.3 percent of GDP within that figure). Furthermore, Central Bank foreign currency reserves topped US$55 billion last week to set a new record.
Yet despite these record levels of Central Bank reserves there was bad news for the balance of payments from the tourist side – in the first 10 months of the year Argentines spent US$9 billion on their travels abroad. Finally, there was more bad news on the commercial front with an increasingly negative balance of trade – despite being a G20 country (and next year’s host) with one of the world’s 30 largest economies, Argentina now ranks 45th among exporters.