After the poor fiscal result in February and with less collection than expected due to the effect of the drought,
the Government has little margin left to meet the deficit target of 1.9% planned for the whole year
.
With little chance of further lowering spending in the election year, analysts warn that Sergio Massa will end up renegotiating this goal with the IMF as well, just as he did with the reserves goal.
The Non-Financial National Public Sector (SPNF) registered a primary deficit of $228,000 million in February.
From Ecolatina they mark that it was
the month with the most deficit in the last 6 years in real terms.
With these numbers, the primary red of the first two months of the year under the metric of the agreement with the IMF accumulated
$ 432,000 million, equivalent to 0.3% of GDP.
"This places the first two months of 2023 as the most deficient in the last 30 years in real terms. Given the accumulated fiscal imbalance, the primary result in March should be practically balanced to meet the fiscal goal for the first quarter, established at $
441,500 million
", warns the consultancy Ecolatina.
For the IARAF, in order to meet the 1.9% goal,
in the next 10 months the government would have to register a deficit of 1.65% of GDP.
"Government compliance with the goal requires the generation of new revenue, a greater real reduction in spending, or a combination of both."
Hand in hand with the drought that reduced income from withholdings by 73% in February and the lower activity, public income -excluding extraordinary items- accentuated its real fall last month with a drop of -8.3% year-on-year and spun
its fourth consecutive month contracting in real terms
.
"Faced with one of the worst starts to the year in fiscal matters,
compliance with the fiscal goal for the first quarter appears further and further away on the horizon
. To achieve this, it would be necessary to reach a primary equilibrium in March, one of the months in which the seasonality of primary spending plays against it. In fact, from 2015 to date the primary result in March was always in deficit," says Ecolatina.
In this framework, "since the reserve accumulation target for the first quarter will most likely not be met, it does
not sound so far-fetched that the government is risking failing to meet the fiscal target in the search for flexibility
(at least for the first quarter) linked to the negative impact that the drought has on public accounts".
For Equilibra
"the climate shock makes the goals established by the IMF for 2023 seem unattainable"
.
They detail that by the end of this month, Argentina had to maintain the Net International Reserves (RIN) accumulated throughout 2022. However, it lost everything accumulated and the RIN are US$ 500 million lower than
those at the end of 2021.
In order to meet the deficit goal set with the IMF, the Government should implement a strong adjustment. "
On the fiscal side, it should reduce the primary imbalance by 0.5 percentage points of GDP in a year of presidential elections, economic stagnation and falling income.
We do not believe that this adjustment will happen," says Equilibra.
In its latest statement, the Monetary Fund announced that Argentina approved the fourth revision of the agreement and that
it will take into account the difficulties in meeting the goals resulting from the exogenous and unexpected shock of the drought.
However, "the agency also criticized the "policy setbacks" and postulated that it will make the RIN goal more flexible by US$ 2,000 million, but not the annual fiscal objective, forcing an adjustment in spending to compensate for lower income," says Equilibra.
"The drought reduced the points of contact between the political-economic needs and the demands of the Fund. The authorities will walk along the narrow ledge that allows them to breach - secretly - the agreement without losing the disbursements of the organization. It is likely that the goals will be
renegotiated each quarter
, with both sides trying to tip the scales to their side, but avoiding a breakup," they said.
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