With legislative elections due in October, progress in narrowing Argentina’s bulging budget deficit will be slow this year and we expect only a modest fiscal squeeze in 2018-19. More fundamentally, fixing the fiscal mess will take us well beyond President Macri’s current term, which ends in 2019. This raises the risk that fiscal consolidation is scrapped altogether by a new populist government. While the prevailing view seems to be that a large fiscal various reasons why progress will remain slow, and while some deficit reduction is likely over the coming years, hopes of big fiscal reforms are likely to be disappointed. The public debt position is currently being sustained by strong nominal GDP growth and falling borrowing costs. But these factors won’t grease the wheels forever.
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