Argentine government subsidies reach 6% of GDP at end-2013

Argentine government subsidies to the private sector reached nearly 6% of GDP at end-2013, said Goldman Sachs in a note to clients.

In January, meanwhile, government subsidies were up 73% year-on-year to 15.9bn pesos (US$2.02bn), accounting for more than 23% of the government's total expenditure, said the investment bank.

In comparison, just 15% of government expenditure went on federal employees' wages.

The growth in subsidies contributed towards a 2% year-on-year decline in Argentina's primary surplus to 799mn pesos in January, while the overall deficit increased 93% to 3.05bn pesos by the same comparison.

However, last week economy minister Axel Kicillof said that the government was looking at a potential targeted reduction in energy subsidies going forward.

"Some restrain in the rate of growth of public subsidies - the main source of fiscal deterioration - would ultimately help in relieving some of the macroeconomic pressures created by the monetization of the fiscal deficit," said Goldman Sachs regarding Kicillof's comments.

"Nonetheless, the pace and magnitude of the potential restraint in the subsidy bill will be crucial to determine its macroeconomic impact."