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See more | Photo caption Maxim Hot 100 The world's most beautiful women as chosen by Maxim readers. Slideshow Afghan army recruit A look at an Afghan recruit as he goes through the process of joining the Afghan National Army. Slideshow Analysis: Argentina faces deficit for first time in years Tweet Share this Email Print Related News Argentina nationalizes oil company YPF Fri, May 4 2012 Analysis & Opinion JPMorgan case puts Volcker Rule and SIFIs back in the spotlight We shouldnâ€™t dread the debt limit Related Topics World » Argentina » Soybeans are harvested at a drought-affected farm near Chivilcoy, about 100 miles (160 km) west from Buenos Aires, April 20, 2012. Experts from INTA, the National Institute of Agricultural Technology, have lowered forecasts of production of soy and corn in Argentina, one of the largest food exporters, due to drought and high temperatures in December and January. Picture taken on April 20, 2012. Credit: Reuters/Nicolas Misculin By Hugh Bronstein BUENOS AIRES | Thu May 24, 2012 3:44pm EDT BUENOS AIRES (Reuters) - Argentina is on track to end 2012 with a primary budget deficit for the first time since the country started recovering from its sovereign debt default a decade ago, government data suggest. If government spending keeps the pace it has set so far this year, the primary balance will be pushed into the red by January. That would threaten funds needed for the welfare programs and subsidies that lie at the heart of President Cristina Fernandez's popularity. This would come at a time of economic growth constrained by global sluggishness. The alarm sounded on Wednesday when the Economy Ministry said April's primary budget surplus was 1.06 billion pesos ($237 million), down 46 percent from the surplus posted in the same month last year. "At this pace the government is likely to show a primary deficit this year," said Boris Segura, who analyses the South American country for Nomura Securities in New York. That would be a black eye for Fernandez, who won re-election in October promising to deepen the policy model forged by her late husband and predecessor as president Nestor Kirchner. Her government shows no sign of reining in the spending. Under the Kirchner/Fernandez administrations, starting in 2003, the state has tightened its grip on the economy. China-like growth rates have been powered by strong soy export revenues that in turn fueled internal demand and industrial production. Argentina is the world's No. 1 exporter of soymeal, used as animal feed at a time of soaring demand from China, whose emerging middle class has acquired a taste for beef steak. But global high soy demand will not save Argentina from a 2012 primary deficit if state spending doesn't ease, said Buenos Aires-based independent economist Maximiliano Castillo. "If the primary spending dynamic does not change, Argentina will probably end this year with a primary deficit," he said. Argentina is also the world's top supplier of soyoil, used for cooking and in the booming international biofuels sector. Unpredictable government policies such as import and foreign exchange curbs have hurt confidence in Latin America's No. 3 economy, reducing foreign investment in the key agricultural sector at a time of stiffening global headwinds. Growth is slowing due to fallout from Europe's financial mess and slackening demand from No. 1 trade partner Brazil, whose economy is also slowing. Fernandez's budget forecasts economic growth of 5.1 percent in full-year 2012. That is far above rates expected for the United States and Europe but well down from 8.9 percent growth Argentina clocked in 2011. Fernandez's popularity has slipped along with the economy, prompting her to put the breaks on promised transportation and energy subsidy cuts. The primary budget balance shows government savings before debts are paid. It is an important indicator of fiscal health in Argentina, which has been virtually shut out of global credit markets since the 2002 default. A primary deficit would likely extend the pummeling the country's international debt has been subjected to in recent months while import curbs and increasingly tight foreign exchange controls have hurt confidence. State income that depends on economic growth, such as tax revenues and social security contributions, have been growing far slower than expenditures over the last year. Capital spending, including the government's public works budget, rose 35 percent in the January-April period. Spending on energy, public transportation and other subsidies was up 18 percent while pension and welfare spending rose 40 percent, Segura said. After debt repayments, April's figures showed a fiscal deficit of 1.86 billion pesos, more than four times bigger than the 411.8 million peso deficit posted in April 2011. The deficit after debt payment amounted to 1.7 percent of gross domestic product last year. "I'm projecting it at 3 percent of GDP this year," Segura said. Fernandez nationalized Argentina's private pension system during her first term and the farm sector complains about wheat and corn export curbs that ensure ample domestic food supply at the expense of growers' profits. She angered Spain and other trade partners this month when she expropriated a controlling stake in Argentina's No. 1 energy company YPF from Spanish oil major Repsol. "The pattern of fiscal profligacy has worsened after re-election," said Gary Kleiman of Washington-based consultancy Kleiman International. "Voluntary commercial debt financing will become more difficult with continued mismanagement," Kleiman added. "I see a primary deficit by year-end." (Reporting by Hugh Bronstein; Editing by Andrew Hay) World Argentina Related Quotes and News Company Price Related News Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (0) Be the first to comment on reuters.com. Add yours using the box above. 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