RGE anticipates tax revenues to increase by 31% y/y to ARS34.1 billion in September 2010 (39.6% y/y three-month moving average, 3MMA). Argentina’s economic recovery and elevated inflation, together with a low base, are likely to continue to drive up income (26% y/y) and VAT revenues (30% y/y). Moreover, income captured from the nationalized pension system (29% y/y) should continue to contribute considerably to fiscal revenues, while international trade taxes should have grown at a strong pace (61% y/y) on the back of high grain prices, especially wheat, and import growth. However, as long as fiscal spending continues to grow at rates above 30%, which has been mostly due to upcoming presidential election in October 2011, strong tax revenues will have a limited effect on Argentina’s primary fiscal standing. Needless to say, large transfers from the central bank are making fiscal accounts look better than they actually are. We maintain our forecast for a primary fiscal surplus of 1.1% of GDP in 2010 from 1.7% in 2009.
Argentina’s Tax Revenue Dynamics (y/y 3MMA)
Source: AFIP and RGE
Editor’s Note: This post is excerpted from a much longer analysis available exclusively to RGE Clients, LatAm Focus: Week Ahead (Week of October 4, 2010)
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