As expected, Argentina’s treasury ran another primary surplus in March of ARS 745.3 billion, above the surplus of ARS 625.0 billion posted one year earlier. The nominal fiscal balance also posted a surplus of ARS 398.9 billion, also above the surplus of ARS 276.6 billion in March 2024. As a result, the primary balance reached an estimated surplus of 0.5% of GDP in 1Q25, while the nominal balance stood at 0.2% of GDP surplus.
Real tax revenues rose in 1Q25, driven by the recovery of economic activity. Total real revenues increased by 1.3% yoy in the period after falling 2.3% in 4Q24. Tax collection rose by 4.3% yoy in real terms in the period, after growing by 3.9% in 4Q24 supported by income taxes, VAT, and social security contributions.
Primary expenditures increased in 1Q25, influenced by an annual base effect due to the significant spending cuts early last year as the current administration took office. Primary expenditures rose by 10.8% yoy in real terms in the period, after falling 22.1% yoy in 4Q24. Pension payments were up 35.6% yoy in real terms (+3.2% in 4Q24) amid the significant drop in inflation. On the other hand, energy subsidies fell by 55.5% yoy, compared with a drop of 29.6% in 4Q24, while payrolls decreased by 4.1% yoy (-24.3% in 4Q24). Capital expenditure increased by 38.0% yoy (-69.7% in 4Q24), while transfers to provinces increased by 134.3% yoy, affected by base effects as both items were frozen at the beginning of last year.
Our Take: We recently revised our primary budget surplus forecast for this year to 1.6% of GDP (in line with the official target), up from 1.3% of GDP previously. The government’s disciplined fiscal management supports our projection.