ANALYSIS OF NATIONAL GOVERNMENT BUDGET EXECUTION – NOVEMBER 2020

ANALYSIS OF NATIONAL GOVERNMENT BUDGET EXECUTION – NOVEMBER 2020

During the month of November, total revenues of the National Government showed an expansion in real terms of 27.0% year on year (YoY) because of the transfer of profits from the Central Bank of Argentina (BCRA) to the National Treasury in the amount of AR$150 billion. If these resources are excluded, total revenues would have fallen by 7.4% YoY.
Tax revenues fell 6.0% YoY, and the 31.1% YoY increase in Income Tax revenues failed to offset the drop in VAT (4.5% YoY) and Export Duties (46.0% YoY).
Primary expenditures (after adjustment of capital expenditures executed in previous years) had, for the first time since March, a variation of less than two digits (1.7% YoY).Considering debt interest (-39.6% YoY), total expenditures in November fell by 18.4% YoY.
By the end of November, AR$32.8 billion of expenditures related to COVID-19 were recorded.
The primary balance shifted from a deficit of AR$105.5 billion in November 2019 to a monthly surplus of AR$57.1 billion in November 2020. The negative financial balance decreased from AR$186.6 billion to AR$9.8 billion.
However, if exceptional revenues, such as transfer of profits from the Central Bank to the Treasury, and expenditures recorded in 2019 that belong to previous fiscal years are not included, November’s primary deficit is equivalent to AR$92.9 billion, which implies a 77.4% deterioration compared to the one recorded in the same period of 2019.
The Pensions item had a contraction of 5.2% YoY due to the decrease in the number of beneficiaries of the system and the benefit mobility policy.
Economic subsidies (AR$60 billion) had a real YoY increase of 19.6%, basically due to those related to energy.
The initial budget for the fiscal year increased by AR$2,7 trillion and 62.9% of this amount was allocated to reinforce social benefits.
Executed expenditure as of November 30 represents 80.6% of current budget appropriation.

ANALYSIS OF NATIONAL GOVERNMENT BUDGET EXECUTION – SEPTEMBER 2020

ANALYSIS OF NATIONAL GOVERNMENT BUDGET EXECUTION – SEPTEMBER 2020

In the first nine months of the year, national government revenue grew by 5.0% YoY in real terms, while expenditure grew by 9.4% YoY, mainly driven by expenditures to mitigate the consequences of the pandemic.

  • Excluding the profits transferred by the Central Bank (BCRA), which totaled AR$1.17 trillion as of September, total resources contracted by 17.6% YoY in real terms compared to the previous year.
  • Primary expenditures increased by 21.9% YoY, basically to mitigate the health crisis.
  • As of September, approximately AR$723.2 billion of expenditures related to COVID-19 were accrued, without which primary expenditure would have expanded by 2.4% YoY in real terms.
  • The primary balance up to September 30, 2019, excluding BCRA profits, went from a surplus of AR$75.9 billion to a deficit of AR$1.4 trillion in the same period of 2020.
  • Social programs registered an execution of AR$85.1 billion in the first nine months of 2019 and AR$671.9 billion in the term January-September 2020, which means an increase of 447.0% YoY in real terms.
  • The initial budget for the year increased by $2.7 trillion and 62.7% of this increase was allocated to reinforce social benefits.
GENERAL DESCRIPTION OF THE CONTENTS OF THE 2021 NATIONAL BUDGET BILL

GENERAL DESCRIPTION OF THE CONTENTS OF THE 2021 NATIONAL BUDGET BILL

The National Budget Bill for 2021 foresees for next year a decrease in deficits due to the partial
recovery of the economy, with an increase in public investments and a reduction in the payment
of interest on the debt.

  • According to the macroeconomic estimates of the Bill, the Gross Domestic Product
    (GDP) will suffer a real fall of 12.1% this year, the nominal exchange rate will be AR$81.4
    per dollar at the closing of the fiscal year, and the YoY inflation rate will be 32%. Next
    year’s GDP is expected to rise 5.5% in real terms, with a nominal exchange rate of
    AR$102.4 per dollar in December, and an inflation rate of 29% YoY.
  • Resources will increase by 9.7% YoY in real terms and total expenditure will fall by
    10.4% YoY.
  • This dynamic between revenue and spending will lead to an improvement in the primary
    balance in 2021, which would go from a deficit of 8.5% of GDP in 2020 to a deficit of
    4.5% in 2021. The same applies to the financial balance, which would vary from a deficit
    of 10.5% of GDP in 2020 to a deficit of 6.0% in 2021.
  • Capital expenditures will have the largest real increase and debt interest the sharpest
    decline.
  • Gross financing needs in the next fiscal year will be AR$6.4 trillion (17.2% of GDP). The
    Central Bank will contribute AR$800 billion to the Treasury, 62.2% less than this year.
  • Exports are expected to recover from a 14.2% YoY decline this year to a 10.4% YoY
    increase next year.
  • The Budget Bill does not provide neither financial allocations for Emergency Family
    Income – IFE (Ingreso Familiar de Emergencia) nor for assistance for the payment of
    private salaries (ATP), but it does provide a 24.1% increase in resources for vaccines
    (AR$45.4 billion), including the purchase of doses against COVID-19 (AR$13.69 billion).
ANALYSIS OF NATIONAL GOVERNMENT BUDGET EXECUTION – JUNE 2020

ANALYSIS OF NATIONAL GOVERNMENT BUDGET EXECUTION – JUNE 2020

  • During the first half of the year, the national government recorded a primary deficit of AR$911.12 billion due to the increase in expenditures and the decrease in revenues, both conditioned by the health crisis.  his deficit was financed with profits from the Central Bank of Argentina.
  • In the first half of the year, primary expenditures increased 22.3% YoY in real terms. This variation is almost entirely explained by the fiscal measures adopted by the national government within the framework of the COVID-19 emergency and the social isolation measures. Meanwhile, given the year-on-year drop in debt interest (-38.7% YoY), the increase in total expenditures had a more moderate expansion of  0.9% YoY.
  • The programs implemented to face the health challenge implied an expenditure of around AR$449.73 billion, without which primary expenditure would have grown by 3.2% in real terms compared to the first half of the previous year.
  • Through twelve amendments, the initial Budget for the fiscal year increased by AR$845.41 billion, 67.6% of which was allocated to reinforce social benefits.
  • In June, pensions and retirement benefits fell in real terms for the first time in the semester (1.4%), but supplementary bonuses caused lower pensions to increase 11.7% above inflation.
  • The 71.8% drop in expenditure on housing and urban development was partly offset by the increase in expenditures on Potable Water and Sewerage, which rose 142.0% YoY, and on Financial Assistance for the Construction of Emergency Modular Hospitals, within the framework of COVID-19 ($4.38 billion).
Analysis of Budget Execution – January 2020

Analysis of Budget Execution – January 2020

Total revenue recorded a real drop of 8.7% year on year (YoY) in January, while total expenditures had a growth of 2.3% YoY.

This uneven performance resulted in a financial deficit of AR$568 million, which contrasts with the surplus of AR$29.71 billion recorded in January 2019. On the other hand, the primary balance was AR$84.47 billion, 30.2% lower in real terms than in the same month of last year (AR$79,21 billion).

  • Tax and social security resources, which together accounted for 86.6% of revenues, showed significant decreases. Income Tax (-18.1% YoY) led the decline mainly due to regulatory issues. The drop is also explained by the legal amendment that reduced the obligation to make contributions on a segment of salaries, in addition to the reduction in the number of contributors last year.
  • The distinctive feature of January’s performance was the lower dynamism of Export Duties, which rose only 3.8% in the year-on-year comparison and had been acting as the driving force of the tax collection with sharp increases.
  • On the other hand, property income increased, basically due to resources from the Sustainability Guarantee Fund (FGS), which reached AR$42.8 billion, showing a real increase of 7.6% YoY.
  • The item Pensions fell 0.6% YoY in real terms. Considering the extraordinary “bonus” of AR$5,000 for the lowest pensions, there was a recovery of 10.3% YoY.
  • Economic subsidies (AR$3.61 billion) contracted 52.5% YoY, which is mainly explained by energy subsidies which had registered an execution of AR$2.05 billion in January 2019 and recorded no outlays in January 2020.
  • Consumer goods and payment of utilities reflected a real drop of 58.4% YoY, as well as capital expenditures, which fell 62.1% YoY. Debt services, on the other hand, increased by 12.4% YoY compared to January of the previous year.
Analysis of National Government Budget Execution – Year 2019

Analysis of National Government Budget Execution – Year 2019

Fiscal year 2019 ended with a real increase in resources of 2.1% with respect to the previous year and with a contraction in expenditure of 6.4% YoY, spread across the main components, apart from debt interest, which increased by 10.7% YoY in real terms.

The combination of these behaviors resulted in a financial deficit of AR$845.99 billion, equivalent to 3.9% of the Gross Domestic Product, 1.7 percentage points below that of the previous year. The primary balance showed a surplus of AR$75.49 billion, an improvement compared to 2018.

The evolution of Export Duties was decisive in the increase in tax revenues, which had a real jump of 164.4% year-on-year because of the increase in tax rates, the devaluation of the exchange rate and the higher quantities exported by the soybean sector.

This scenario offset the fall in other tax items and the resources of the social security system, affected by the lower economic activity and the reduction of taxable wages.

In 2019, national government expenditure reached AR$4.74 trillion, which implies an execution level of 96.2% of the allocated budget. The initial approved appropriation increased by 18.1%, with debt interest being the item that most contributed to such variation (29.2%).

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