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Cablegate: Argentina Economic and Financial Review, September 21-24,

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PP RUEHAO RUEHCD RUEHGA RUEHGD RUEHGR RUEHHA RUEHHO RUEHMC RUEHMT
RUEHNG RUEHNL RUEHQU RUEHRD RUEHRG RUEHRS RUEHTM RUEHVC
DE RUEHBU #1079 2682017
ZNR UUUUU ZZH
P 252017Z SEP 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC PRIORITY 4404
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS PRIORITY
RUEHSO/AMCONSUL SAO PAULO PRIORITY 3962
RUEAIIA/CIA WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHINGTON DC PRIORITY

UNCLAS BUENOS AIRES 001079

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: EFIN ECON EINV ETRD ELAB EAIR AR
SUBJECT: ARGENTINA ECONOMIC AND FINANCIAL REVIEW, SEPTEMBER 21-24,
2009

1. (U) Provided below is Embassy Buenos Aires' Economic and
Financial Review covering the period September 21-24, 2009. The
unclassified email version of this report includes tables and charts
tracking Argentine economic developments. Contact Econ OMS Megan
Walton at WaltonM@state.gov to be included on the email distribution
list. This document is sensitive but unclassified. It should not
be disseminated outside of USG channels or in any public forum
without the written concurrence of the originator. It should not be
posted on the internet.


DISAPPOINTING AUGUST PRIMARY FISCAL SURPLUS, DOWN 85% Y-O-Y
2.(SBU) The GoA announced September 21 that the August primary
fiscal surplus declined 85% y-o-y to ARP 540 million from ARP 3.7
billion a year ago and was also much lower than private analysts'
estimate of ARP 889 million. This was the result of
weaker-than-expected tax revenues, which increased only 5% y-o-y to
ARP 19.9 billion, and higher primary expenditures, which increased
22% y-o-y to ARP 19.3 billion. Taking interest payments into
account, the overall fiscal balance for August is a deficit of ARP
245 million. Expenditures were mainly driven by an increase in
capital expenditures, transfers to the provinces and to the private
sector (subsidies), and social security benefits. Year-to-date the
primary surplus is at ARP 8.5 billion, or less than a third of the
ARP 28.0 billion booked during the same period in 2008. In a press
conference, the Minister of Economy Amado Boudou along with
Secretary of the Treasury Juan Carlos Pezoa attributed the weak
fiscal result to the impact of the H1N1 flu and the international
financial crisis, as well as the implementation of a
counter-cyclical fiscal policy to alleviate the effects of the
global crisis. Boudou also noted that a 1.38% of GDP (or about ARP
15 billion) primary surplus target "is achievable" for 2009.
GDP DOWN 0.8% Y-O-Y IN Q2 2009
3.(SBU) The GoA announced September 18 that GDP decreased 0.8% y-o-y
in the second quarter of 2009, after increasing 2% in Q1, which
results in an accumulated increase of 0.6% in the first half of the
year. In sharp contrast, private analysts estimate a fall in GDP of
6% for the second quarter. The second quarter decline is mainly due
to a fall in private consumption (down 2%) and investment (down 11%)
with a drop both in construction (-5%) and in plant and machinery
investment (-19%), all of which were partially offset by an increase
in public consumption (+6%). The implicit GDP price deflator
increased 8.7% y-o-y for Q2, not reflecting private inflation
estimates hovering around 12-15%.
THE POVERTY RATE DROPPED 3.9 PERCENTAGE POINTS TO 13.9% IN THE FIRST
HALF OF 2009, ACCORDING TO INDEC
4.(SBU) On September 22, INDEC announced that the poverty rate fell
to 13.9% in the first half of year from 17.8% for the same period a
year ago, well below private sector estimates of around 32-35%.
According to the GoA, the 13.9% poverty rate represents 3.4 million
people. Analysts were surprised that INDEC's announcements did not
maintain the recent trend of narrowing the gap between official
figures and private estimates.


MARTINEZ

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