Quarterly Public Accounts Report | Q4 2014

What was the fiscal deficit in 2014, why was it concentrated in the fourth quarter, and what is the difference between what was executed and the 2015 Budget Law? May 2015 Report.

The drafting of budget reports gives us conflicting ideas:

  1. There is always the expectation of seeing what has changed, in a country that, by default, has accustomed us to changes.
  2. The consolidated information that the report is based on has a reasonable delay in publication; at the time of writing it, it gives the impression of writing yesterday's news, issues that the public has already understood and processed.

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But before continuing, a clarification is necessary, especially for regular readers. At the Observatory, we strive to make each current affairs report self-contained.

In other words, the analysis should not only show the specific budgetary characteristics of each quarter, but also provide a brief explanation of the concepts included. Given this premise, some concepts will inevitably be repeated throughout the reports.

As the emphasis of economic policies changes, the concepts heading each section will change accordingly.

Notes on what the year left us

In terms of results, the available official information seems to confirm the consolidation of a declining trend in the budget, which has been ongoing since 2010. The year 2014 ended with a primary deficit of $38.562 billion, generated almost exclusively in the last quarter. The accumulated deficit for the first three quarters of the previous year totaled only $419 million.

This should not lead to a misinterpretation. The presence of a trend outlined in just five observations (2010-2014) does not imply that it cannot be reversed. Nor does it imply that the national government lacks the capacity to meet its debt obligations.

2015 Budget vs. 2014 Implementation

Considering these figures, one fact that is difficult to explain is the gap between the information contained in the national budget law and the observed performance. In the projected budget for 2015, the Government set a financial deficit of approximately $49.624 billion.

However, in the 2014 fiscal year, the same item showed an overall deficit of approximately $109.702 billion. In other words, the projected overall deficit for the current year is 2,2 times lower than the one actually recorded for 2014.

National Budget Law 2015: expenditures by purpose, resources, and financial result of -$49.624 billion. Source: MECON

Beyond the speculation surrounding the budget projections, there is one specific piece of data that requires further explanation: the sharp increase in the primary deficit recorded in the last quarter.

Why did the deficit grow in the last quarter?

In this regard, one of the factors explaining this increase is the depletion of the BCRA's transfer mechanism . By the third quarter of 2014, 82% of the total amount available by law had already been spent: the amount of profits accumulated by the BCRA the previous year.

The balance of the social security system is another factor that helps explain this growing deficit. Increases in social security contributions peaked in October and November. However, these increases were not enough to offset the growing deficit in this area, which totaled approximately $62.496 billion for 2014.

Energy expenditures and subsidies

Considering the expenditure side, the items that show the greatest growth in the fourth quarter in relation to the whole of the year are: transfers to the private sector, expenditures on goods and services, expenditures on salaries and automatic transfers to provinces.

However, of the four mentioned, only transfers in the area of ​​subsidies were among the items with the greatest growth throughout the year.

Regarding the latter, economic subsidies grew by 57,1% throughout 2014, reaching $224.734 billion. Of this figure, more than 70% corresponds to subsidies in the energy sector.

In this quarter, two factors beyond the government's control contributed to a 17,3% decrease in transfers to ENARSA. These were the reduction in diesel prices and a much cooler December than projected, which reduced peak electricity consumption.

In the document we've made available for download, we offer a more detailed explanation of all these issues. We encourage you to share it and delve deeper into its content.

Open access, for use and citation

The report is available freely and without charge, under a Creative Commons license (CC BY-NC-SA 4.0):

Informe Trimestral de Cuentas Públicas | IV Trimestre de 2014. Informes del Observatorio UNR N.º 5 — Serie Informes de Coyuntura N.º 3, mayo de 2015. ISSN 2683-9067 / 2683-9075. Autores: Germán A. Tessmer, Norberto Martín y Carolina Paz.