Source: Financial Times
By: Jude Webber
09.15.2008Argentina expects its economy, which has been growing at rates of over 8 per cent for the last five years, to expand by 4 per cent in 2009, but Sergio Massa, the cabinet chief, said that that level was "more than reassuring in the international context we're facing".
International financial turmoil in the wake of the collapse of Lehman Brothers and the global credit crunch have recently sent Argentina's country risk soaring and revived fears that a fresh default could be brewing, echoing the country's giant 2001-02 debt and default crash.
But Mr Massa, outlining the draft 2009 budget in a news conference, said the government was "clearly committed" to meeting its financial obligations next year, and to keeping orderly fiscal accounts, though he gave no details.
Argentina is waiting for the Paris Club of creditor nations to respond to its plan to repay debt in default with the 19 member countries since its economic crisis. The Paris Club is expected to meet on the issue on Wednesday, but some economists question the wisdom of Argentina using central bank reserves for a lump sum repayment at a time of global financial turmoil.
Argentina says it owes the Club $6.7bn but there is some dispute over the exact figure and it could be slightly higher.
A settlement with the Paris Club would leave the holders of defaulted bonds who rejected a 2005 bond restructuring still demanding $29bn including interest, but Mr Massa made clear there was no immediate offer on the cards because of a law preventing any fresh offer to the bond "holdouts" before 2010.
Mr Massa said the budget, which was sent to Congress, forecasts a primary surplus of 3.27 per cent of gross domestic product, and a trade surplus of nearly $12bn.
The government is forecasting 2009 inflation of 8 per cent, but official inflation statistics are almost universally disbelieved after more than 18 months of alleged government meddling in the state statistics institute. Private economists believe inflation is currently running at 25 to 30 per cent a year, up to triple the official rate, which was 0.5 per cent in August.
Mr Massa, who has been pushing for a reform of the much questioned agency, sidestepped questions about the validity of the official data and said the government would use "all tools available" to meet the inflation goal.
President Cristina Fernández and her husband and predecessor, Néstor Kirchner, have built their economic model around a web of subsidies and a competitive, managed exchange rate.
Mr Massa said the 2009 budget would slash energy subsidies by nearly 30 percent and would seek to maintain an exchange rate during the year of 3.19 per dollar, compared with around 3.14 now.
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