ZCZC
BCN-03
ARGENTINA-ECONOMY-LOAN
Key things to watch in Argentina after IMF boosts loan
BUENOS AIRES, Sept 27, 2018 (BSS/AFP) – Through-the-roof inflation, rising
unemployment, recession and social upheaval have marked the economic crisis
in Argentina, which on Wednesday secured a new loan agreement with the IMF.
Here are the key things to watch for as President Mauricio Macri’s
beleaguered government seeks to emerge from the crisis armed with an
increased $57 billion loan.
– On the slide –
Analysts say the first challenge is to stabilize the markets and boost
economic output. The renegotiated IMF deal is designed to ease concerns over
Argentina’s loan financing needs and currency fluctuations.
However, “the next few months will be economically challenging for
Argentina even if the deal accomplishes these goals,” said Daniel Kerner,
Latin America specialist at Eurasia Group.
Economy Minister Nicolas Dujovne admitted that Latin America’s third-
largest economy has been fighting a losing battle with recession. GDP fell
4.2 percent in the second quarter compared to the same period in 2017.
Industrial output saw its third consecutive monthly decline in July, down
5.7 percent, and further disappointing data is expected for August and
September. The government estimates the economy with contract by 2.0 percent
this year.
The economic forecast has tumbled from growth of 3.5 percent of GDP to 0.5
percent shrinkage for 2019 after drought hit key agricultural exports.
– Sky high –
The prices of essential products, especially food items, continue to
increase as inflation has accelerated since April, fueled by pressure on the
peso that saw it shed half its value against the dollar since the beginning
of the year.
The central bank raised its interest rates to 60 percent, but that and
other steps have brought only temporary relief.
The knock-on effect on prices of household goods and fuel formed an
inflationary cocktail that has withered the purchasing power of ordinary
Argentines.
MORE/HR/0908
ZCZC
BCN-04
ARGENTINA-ECONOMY-LOAN 2 LAST BUENOS AIRES
Annual inflation to August was over 24 percent but economists are
predicting it will hit more than 40 percent by December.
-Social unrest-
The country is vulnerable to social upheaval and a general strike on
Tuesday brought the country to a standstill.
Unemployment has risen to nearly 10 percent as Marci sought to streamline
the bloated public sector.
Unions are up in arms and are demanding the government row back on pension
cuts, tax increases, and the closure of factories they say have been par for
the course since market-friendly Macri came to power in 2015.
There are constant protests on the streets of Buenos Aires against
austerity measures imposed by the IMF, which has reawakened painful memories
of previous bailouts.
The still-powerful Catholic Church has sounded the alarm over a growing
number of people using food handouts to feed their families.
The percentage of the population living under the poverty threshold was
25.7 percent, according to the most recent figures.
– Budget deficit –
The government has agreed to cut back on spending — Macri has halved the
number of government ministries — and pledged to balance the budget in 2019,
a year sooner than agreed in June at the outset of the IMF loan.
But many analysts see the plan as highly ambitious — the deficit was 3.9
percent in 2017, and projected to be 2.7 percent this year — and likely to
increase union opposition on the streets.
– Elections in 2019 –
The crisis doesn’t bode well for Macri’s re-election prospects next year.
Argentina goes to the polls to elect a new president in October 2019 and the
center-right leader confirmed in New York this week that he would seek a
second four-year term.
His popularity rating is low, but he retains the support of about a fifth
of the electorate and is aided by a divided leftist opposition
Its leader, former president Cristina Kirchner, is still the most popular
politician in Argentina despite a string of corruption scandals. She is
expected to be Macri’s main challenger, if she can survive the courts.
An opinion poll by the University of San Andres shows Macri’s rating fell
by half over the past nine months, from 66 percent last October to 34 percent
in August.
BSS/AFP/HR/0910