Argentina posts fiscal deficit of 1.5 percent of GDP in first half

Argentina's Treasury Minister Nicolas Dujovne addresses the media in Buenos Aires, Argentina February 22, 2017. REUTERS/Martin Acosta

BUENOS AIRES (Reuters) - Argentina posted a primary fiscal deficit of 144 billion pesos ($8.4 billion), or 1.5 percent of gross domestic product, in the first half of 2017, Treasury Minister Nicolas Dujovne said on Wednesday, beating the government target for a gap of 2 percent of GDP.

The primary fiscal deficit was 103 billion pesos in the second quarter, compared with 41 billion pesos in the first quarter.

For June, Argentina posted a primary fiscal deficit of 57 billion pesos, compared with 27 billion pesos in May.

The primary budget balance, which measures government spending relative to income and does not include debt payments, is followed by the markets as an indicator of Argentina’s ability to meet its financial obligations.

Cutting the fiscal deficit of Latin America’s No. 3 economy is a key priority for business-friendly President Mauricio Macri, who took office in December 2015. The government is aiming to cut the deficit to 4.2 percent of GDP in 2017 and 3.2 percent in 2018, compared with 4.6 percent in 2016.

Dujovne said there was “no doubt” that the country would meet its annual goal this year. He pointed to a 32 percent increase in government revenue in the first half of the year as “consistent with the reactivation observed in the economy.”

Argentina’s economy shrank 2.2 percent in 2016, but emerged from a deep recession to post modest growth in the final two quarters of last year. The economy has expanded 0.4 percent in 2017 through April compared with the same period last year, according to government data.

The total financial result, which includes payments on the public debt, was a deficit of 92 billion pesos in June, up 26.5 percent from the same month last year. In the first half of the year, the deficit including interest payments was 256 billion pesos, up 43 percent from the year-ago period.

($1 = 17.2600 Argentine pesos)

Reporting by Eliana Raszewski; Writing by Luc Cohen; Editing by Chizu Nomiyama and Richard Chang