Treasury Minister Nicolás Dujovne (center) during today's announcement. (Télam / Enrique Cabrera)

Argentina’s fiscal deficit for the first quarter of 2018 of 0.3 percent of Gross Domestic Product (GDP), surpassing the target set by the Mauricio Macri administration.

While spending decreased has real terms, debt interest payments have also increased significant in the last year according to the Treasury Ministry figures.

With March figures showing that the fiscal deficit (including the one-off revenue generated by the tax amnesty) 14.702 billion pesos (US $729.5 million), the fiscal deficit for the first quarter of 2018 has been calculated as 31.001 billion pesos (US $1.54 billion), roughly equivalent to 0.3 percent of the GDP. The deficit target for the quarter was 0.6 percent of GDP, and the Treasury Ministry estimates that it beat the target by 39 billion pesos (US $1.93 billion). The GDP figures are based on estimates and are provisional for the moment.

The government is aiming for a fiscal deficit, excluding interest payments, of 3.2 percent of GDP for 2018.

“We have beat the fiscal target for the first quarter by 0.3 GDP percentage points and we have have nine consecutive months of revenue increasing more than primary spending,” said Treasury Minister Nicolás Dujovne, who has among one of his missions to clamp down on spending by the ministries in the Macri government.

Dujovne added that the fiscal targets have been beat for five consecutive months as well as three months of spending increasing at a clip slower than inflation. As such, he noted that government spending is decreasing relative to GDP.

Fiscal deficit figures Q1 2018 Argentina by The Bubble on Scribd

According to the Treasury Ministry, the deficit shrank by 25 percent in the first quarter of 2018 compared to the first quarter of 2017, and by 36.8 percent if the results of the tax amnesty are excluded from the calculations.

By the same token, the interest on debt jumped from 29.293 billion pesos (US $1.45 billion) in Q1 2017 to 60.522 billion (US $3.0 billion) Q1 2018, equivalent to an 106.6 percent increase. Interest payments amounted to about 9.12 percent of total spending in the first quarter of 2018.

As such, the Q1 deficit for 2018 amounted to 106.523 billion pesos (US $4.53 billion) if interest payments are considered and tax amnesty results are excluded. This represents a year-on-year expansion of 4.3 percent.

In line with estimates, Dujovne said today that he expected the impact of the drought on agriculture production to result in a reduction of between 0.8 and 1 percentage points on the GDP, but that GDP growth for the year would still be in the realm of 3 percent. The revenue impact of the decreased production is expected by the Treasury Ministry to be offset by higher prices for agricultural goods.

Yesterday the INDEC reported that inflation in the first quarter of 2018 has been 6.7 percent, high considering the 15 percent target set by the government for the entire year. Dujovne said today that he expects the rate to come down May and that the drought had had an impact on prices.

“The (inflation) target is not an estimate. The Central Bank has our full support to reach the objective. We knew that the first quarter would be the toughest, because that’s when the majority of the increases in the regulated prices would take places and that ends up affecting core inflation. From here on out there are less increases in regulated prices” said Dujovne.