(Adds details from report, quotes from finance minister)
BUENOS AIRES, Sept 15 Argentina will register a
primary fiscal deficit equivalent to 4.2 percent of gross
domestic product in 2017, higher than previously promised,
according to the budget bill the government presented to
Congress on Thursday.
After taking office in December, President Mauricio Macri's
government promised to reduce the deficit next year to 3.3
percent of gross domestic product from 4.8 percent in 2016 as
part of a series of free-market reforms meant to attract
investment in Latin America's No. 3 economy.
Finance Minister Alfonso Prat-Gay said the government would
seek to lower the deficit further in subsequent years, but said
cutting it too aggressively in this budget would harm efforts to
spur Argentina's economy, which remains mired in recession.
"We think it would have been a mistake to be more aggressive
in deficit reduction, as some sectors of society asked us to
do," Prat-Gay said. "We think that would have killed the
Achieving the 3.3 percent goal would have required drastic
spending cuts, Prat-Gay said. The 2017 budget includes an
increase in spending on public works, consistent with a key
Macri administration goal to boost infrastructure investment
after years of neglect.
The economy will shrink by 1.5 percent in 2016, larger than
the 1 percent contraction government officials said they were
expecting as recently as last month, according to a copy of the
Prat-Gay reiterated a growth forecast of 3.5 percent in 2017
and the government's expectations for 17 percent inflation next
year, down from around 40 percent currently.
Macri's initial deficit target was widely seen as too
ambitious, as economists noted that voters grew accustomed to
generous welfare spending during eight years of free-spending
populism under previous President Cristina Fernandez.
Macri's party does not have a majority in Congress and needs
the support of moderate leftists to pass reforms and avoid
losing sway in congressional elections to be held next year.
Prat-Gay promised the budget included all the government's
planned expenses, and that there would not be any mid-year
"surprises," an allusion to widespread allegations that the
Fernandez administration doctored economic data and was
"We are not hiding anything," he said.
A Supreme Court decision blocking the government's plans to
eliminate home heating gas subsidies was part of the reason the
deficit will be larger than expected, Prat-Gay said.
Markets largely did not react to the budget announcement on
Thursday, as the figures fell within expectations.
(Reporting by Walter Bianchi; Writing by Caroline Stauffer and
Luc Cohen; Editing by Chizu Nomiyama and Phil Berlowitz)