Argentina saves 10% more

The ARG$2-billion saving expected for September was high from the very beginning. In the end, it hit ARG$200 millions more, dispelling doubts about a crucial aspect of economy growth. In fact, nobody would expect GDP to rise 7.5 per cent in 2007 (as main Wall Street economists believe), if primary surplus fades. Even with downward interest rates in US and high soy values, a public spending outburst eating saving would complicate the outlook. Therefore, this will be the variable to follow in 2007, a year when presidential and governor elections will make more appealing approval of public works financing, subsidies and all options producing positive results in ballot boxes. That's why caution in public accounts is so important. Chile, for example, with copper price at record levels, aims at a 7-per cent surplus of GDP, twice as much as Argentina's. Brazil does not get left behind, and despite facing a second round, Lula promises more saving than current 4.25 per cent and wants to eliminate deficit which arose after debt interest payment.

Argentine public sector accounts closed September with a surplus of ARG$2.21 billions, 36.8 per cent more than the same month of 2005, as Argentine Economy Ministry reported yesterday. With this result, surplus accumulated during the first nine months reached to ARG$19.09 billions, against the expected ARG$19.6 billions for the entire year. That implies that, between January and September 2006, almost all public saving stipulated in 2006 Budget was obtained, something foreseeable since supplies are always underestimated.

If current fiscal surplus trend continues until December, it may touch 4 per cent of GDP, exceeding the 3 per cent set in Budget. Moreover, that 4 per cent would be the percentage expected by the International Monetary Fund and which led Argentine President Néstor Kirchner to break off talks with the financial organization.

Potential expenditures

However, in order to attain that primary surplus level (around ARG$27 billions should be involved altogether), public spending in December should stay at current values and fiscal saving should not slide from ARG$2 billions, a goal not observed by government during the first three years of administration, since expenditure rises are usually announced for the last month of the year, like advanced payment of salary bonus to civil servants.

These September ARG$19.09 billions were also 19.5 per cent higher that the ones originally forecasted for January-September period.

The negative side of September data is capital spending growing above current expenditures. While primary expenditures grew 25.6 per cent with respect to the same month of 2005, capital ones (which are permanent) leaped 64.6 per cent.

For Argentine Economy Ministry, this increase, which is higher than collection (growing monthly at a 29-per cent average), should not be a source of worry, since "such hike shows how significant it is to invest in public works, both at the national and provincial level, through great capital transfers.

During September, debt payments also increased, touching ARG$776.1 millions, against ARG$707 millions settled last year. Meanwhile, current revenues summed ARG$13.32 billions, 25 per cent more than the same month of 2005.

Transfers

Current expenditures hovered around ARG$10.5 billions, 18 per cent more than in 2005. Out of which, half belonged to "current transfers" to provinces, private sector, public and universities, among others.

For 2007, budget bill forecasts a primary fiscal surplus of ARG$21.82 billions (3 per cent of GDP) and a surplus financial result of ARG$7.13 billions.