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The
data, however, are not sufficient to indicate a recovery, since December
followed a historic 11.6% decrease in November, which indicates that
consumer confidence remained low. Furthermore, consumers remain
sceptical about the potential positive impact that the International
Monetary Fund’s (IMF) financial support will have on the current
recession. Of the individuals surveyed only 23% expect the IMF
support to have a positive effect on the economy, while 34% believe the
effect will be negative and another 24% expect no repercussions at all.
Panellists
remain sceptical about the government’s 0.5% growth forecast for 2000.
The 2000 growth estimate was again revised downward over the
previous month with some panellists expecting a contraction.
Improved prospects for a more favourable interest rate environment
this year are likely to drive the economic recovery.
Participants expect growth to remain modest but to recover in line
with the government’s estimate.
Financing
for 2001 secured.
Even if adverse international conditions should again emerge
sometime this year, Argentina’s public sector finances are secure.
The US$ 18 billion IMF-led aid package, which includes financing from the
Fund, World Bank and the Spanish government, will provide 85% of this
year’s US$ 21.2 billion in financing requirements, with the balance
coming from internal sources, particularly private pension funds.
The conclusion of the IMF package has reinstilled international investor
confidence as evidenced by the tightening of the spread to US Treasuries
on Argentina’s sovereign FRB, which narrowed by 183 basis points in
December. Simultaneously, the IMF support together with the easing
by the US Federal Reserve in early January has served to lower domestic
interest rates. In early January, the government’s auction of
90-day treasury securities garnered 8.3%, down 350 basis points from
December. If sustained, the lower interest rate environment is
likely to serve as an important backdrop for economic recovery this year.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Argentina. For more details please click here.
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