Record budget, trade deficits for 2017 in Argentina

Data released this week by Argentina's Statistics Institute (INDEC) yielded record budget and trade deficits for the country in 2017.

The nation's merchandise trade deficit reached $8.5 billion - a sharp reversal from the $2 billion surplus registered in 2016. Budget deficits, in turn, rose by 56% to a record 569 billion pesos ($34.4 billion, at the average 2017 exchange rate).

Excluding Central Bank intra-agency interest income, the federal budget deficit reached 629 billion pesos ($38 billion) - over 6% of GDP.

Revenues and primary spending each rose by 22% in peso terms (a 3% reduction after inflation); but debt interest outlays jumped by 71%. Higher interest outlays far outstripped savings from a 22% reduction in subsidies, whose cutbacks have led to utility rate hikes of 700 to 1400% and public transport hikes of over 200%.

Trade woes

The record trade deficit resulted from sharply higher imports, which rose nearly 20% to $66.9 billion. Imports were significantly higher last year in all major categories, with motor vehicle and parts imports in particular up 41%.

A sharp reduction in taxes on new cars, as well as a recovery in consumer credit, led to a 22% rise in new car and truck sales to 884,000 - the highest since 2013. Imports from Brazil, however, accounted for the entire improvement, such that motor vehicle output slipped 0.1% to 472,000 (the lowest since 2006).

Argentina's trade deficit with Brazil, its largest trading partner, rose by 87% to $8.7 billion. Deficits likewise worsened with China (by 33%, to $7.7 billion); with the U.S. (by 25%, to $3.1 billion); and the EU, which doubled to $2.8 billion.

Exports, in turn, grew 1% to $58.4 billion. This comes despite a slight improvement in export prices and despite around $1.5 billion in tax cuts for agricultural and mining exports - the second such tax cut since the right-wing Mauricio Macri administration took office with staunch support from these sectors two years ago.

Argentine export income remains virtually unchanged from 2015 levels, when a sharp fall in commodity prices affected earnings. Farm, agroindustrial, and mining exports - 64% of the nation's total - had risen by 6% in 2016; but fell by 4% last year.

While 4th quarter balance of payments data is still to be released, the current account deficit likely topped $32 billion when tourist outflows, foreign debt payments, profit offshoring, and other net debits are included.

Argentina has thus far financed this record shortfall by attracting short-term portfolio investment, mostly by borrowing through bond purchases by foreign banks - some $122 billion in the last two years.

At: https://translate.google.com/translate?hl=en&sl=es&tl=en&u=https%3A%2F%2Fwww.diarioregistrado.com%2Feconomia%2Fel-deficit-financiero-asciende-hasta-629-050-millones-de-pesos_a5a5fe674a4d76178ffbd827f

And: https://translate.google.com/translate?sl=es&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=https%3A%2F%2Fwww.tiempoar.com.ar%2Farticulo%2Fview%2F74093%2Fel-2017-cerra-con-da-ficit-comercial-ra-cord&edit-text=