Argentina to cut subsidies by 0.6 pct of GDP in 2018 -source

BUENOS AIRES, Aug 31 (Reuters) - Argentina plans to cut energy and transportation subsidies worth 0.6 percent of gross domestic product next year as the government aims to lower the fiscal deficit to 3.2 percent of GDP, a Treasury Ministry official told Reuters on Thursday.

The government is also depending on economic growth to increase tax revenues, and on public-private partnerships and a more efficient public sector to reduce spending, said the source, who asked not to be identified before the 2018 budget plan is officially presented to Congress in early September.

Spending on subsidies for electricity and home-heating natural gas ballooned under populist former President Cristina Fernandez, winning her support among the poor but raising the alarm among economists who warned that fiscal deficits were becoming unsustainable.

Current President Mauricio Macri began cutting subsidies in order to balance the budget shortly after taking office in December 2015. Hikes in gasoline, public transit and utility prices are key to the government’s goal to cut the deficit to 4.2 percent of GDP in 2017, down from 4.6 percent last year.

Government spending on such subsidies is expected to fall to 2.5 percent of GDP by the end of 2017, down from 3.6 percent last year, according to a J.P. Morgan report. With a 0.6-percentage point reduction next year, total subsidies spending would thus fall to 1.9 percent of GDP by the end of 2018.

The source said government infrastructure spending in 2018 would remain in line with this year, but that total public works investment would increase because of private capital. The new public-private partnership program is expected to attract around 100 billion pesos ($5.77 billion) next year, or roughly 1 percent of GDP, the source said.

Cuts to social security and welfare programs are not expected, according to the source. ($1 = 17.3200 Argentine pesos) (Reporting by Eliana Raszewski and Luc Cohen; Editing by Alistair Bell)