Government pencils in higher 2017 fiscal deficit in its first Budget

Source: Buenos Aires Herald
By: Herald Staff

The Mauricio Macri administration upped its primary fiscal deficit projections for 2017 to 4.2 percent of Gross Domestic Product, greater than 3.3 percent promised earlier this year. The revised figure stems from the government’s first budget, which also stipulates an estimated 3.5 percent growth in GDP next after this year’s 1.5 percent contraction. Finance Minister Alfonso Prat-Gay presented the 2017 Budget in Congress yesterday, formally kicking off the review process to generally cautious approval by the opposition. Annual inflation will slow to the range of 12 to 17 percent in 2017, according to estimates included in the bill.

The new budget target won’t add pressure on the economy, which is showing a budding recovery,” and takes into account what Argentina needs to do to “generate jobs and tackle poverty,” Prat-Gay said yesterday. The government would have to impose “a fiscal adjustment we don’t want to do” if it continued to pursue the previous goal, he added.

Prat-Gay said the wider deficit target was due to the government’s decision to settle decades-long legal disputes with pensioners and to the injunction issued by the Supreme Court that halted efforts to reduce subsidies on natural gas rates. The government has proposed a more gradual increase in tariffs following the ruling.
As the government invests in infrastructure, social security spending will increase 35 percent and capital expenditure will rise 32 percent next year, according to the budget.


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