UPDATE 2-Argentina says 2014 primary budget deficit sharply widens

viernes 19 de diciembre de 2014 11:02 GYT

(Adds analyst comments and context)

By Walter Bianchi and Richard Lough

BUENOS AIRES Dec 19 (Reuters) - Argentina forecasts a sharp widening of its primary fiscal deficit in 2014 after the leftist government used high state spending in an attempt to sustain domestic demand in the stagnating economy dogged by runaway inflation.

Cabinet chief Jorge Capitanich said the primary deficit, which excludes interest payments, would come to 56 billion pesos ($6.55 billion), or 1.35 percent of the gross domestic product this year. Argentina ran a primary deficit of 22.5 billion pesos in 2013.

The numbers suggest a sharp fiscal deterioration is expected in the month of December, with data from the economy ministry showing the deficit in the eleven months to end-November standing at 15.2 billion pesos.

The result does not include debt interest payments. The primary budget is closely followed by financial markets as it represents a country's capability of honoring its financial commitments.

Capitanich said the overall fiscal deficit would be 137 billion pesos, equivalent to 3.3 percent of GDP.

Argentina logged its first primary budget deficit in 16 years in 2012 when a decade-long boom hit a brick wall due to weak global demand, high inflation and government trade and currency controls on investments.

Heavy state spending on energy subsidies and welfare programs have failed to bolster domestic demand, with inflation running at one of the world's fastest rates and the currency weakened under pressure from low foreign reserves.   Continuación...