Alphacast Highlight - Fiscal Result March 2023

Fiscal target was not met

The fiscal deficit was ARS 258bn in March 2023. Thus, a deficit of ARS 690bn was accumulated in 1Q 2023 and the IMF target (set at ARS 441.5bn) was exceeded by 56%. Meanwhile, this 1Q fiscal excess already covered 34% of the deficit allowed during Q2.

Revenues fell 21% YoY in real terms, recording 5 consecutive months of declines. The drop was explained by the awful performance of Export taxes, which fell 84% YoY and 68% vs. Q1 2022. Among the main causes, highlights the early settlement during the Soybean-FX 2 and the incentive to retain grains until the arrival of a new Soybean-FX (implemented just in April).

Although primary spending decreased 17% YoY, it was not enough to avoid the weak fiscal outcome. 86% of the spending decline was explained by the drop in Economic subsidies and Social benefits. Subsidies fell 68% in the scenario of the tariff segmentation required by the IMF, while Social benefits fell by 4% due to the lag in their mobility formula and the impact of the inflationary increase. Public work was the only category that went up (+21% YoY).

The higher-than-expected fiscal deficit will force the Treasury to rise the rollover rates in further LCU debt auctions to ease monetary assistance from the Central Bank. That said, it will be necessary both a high acceptance of the new Soybean-FX and a deeper tariff adjustment (in an election year). Meeting the -1.9% deficit target in 2023 does not look easy.

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