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Export benefit limited and domestic
growth pick-up needed.
The government’s new trade measures are likely to give Argentine
businesses a competitiveness boost. However, significant gains are likely
to be offset by the downturn in global demand, the recent strong nominal
appreciation of the Peso relative to the Real and the Euro as well as low
international commodity prices. Trade data show that export growth slowed
to 2.4% in May over the same month in 2000, which is well below the double
digit monthly export growth rates registered during the same period last
year. Due to continued declines in imports resulting from the economic
downturn the trade balance surplus continues to widen. In May the annual
trade surplus grew to US$ 1.6 billion, up from US$ 1.7 billion in April.
The Consensus sees export growth moderating significantly from the 12.9%
last year. The stimulus for a recovery, thus, will have
to be a pick up in domestic demand. However, consumption remains
depressed as a result of consumers’ concerns about the political
sustainability of the current economic policy mix. An increasingly
vociferous opposition from provinces controlled by the opposition party Peronists and mounting labour unrest could increase political pressures on
the government to reconsider the current economic agenda.
Further recession in the making.
Panellists have factored the first quarter data release into this month’s
forecasts. A healthy recovery in economic activity is now anticipated to
remain absent this year. The continued pessimistic outlook for
Argentina has an increasing number of panellists foreseeing a third year
of recession in 2001. The
Economy Minister remains confident that growth will pick up in the final
two quarters of this year and sees the GDP expansion at 2.2%, a small 0.2
percentage point downward adjustment from the government growth projection
from earlier 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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