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It is official: Argentina faces third
year of recession. Suspicions
voiced in previous month’s Consensus Forecast that the recession is likely
to persist this year have been confirmed in this month’s publication as
panellists have again revised downward their forecasts, with the Consensus
now expecting a contraction this year. The government expects the
economic activity to have contracted 0.5% in the second quarter and to
drop by another 1.0% in the third quarter. As a result, authorities have
revised the official growth forecast downward from 2.0% expansion to a
contraction of 1.4% this year. Next year’s forecast has also been
downgraded by the government from the 5.0% highlighted by Economy Minister
Cavallo just a couple months ago to 3.5% but still remains well above the
Consensus Forecast figure.
Governability threatened by Alliance
splintering.
The government’s current economic agenda has been faced with increasing
opposition not only from social movements and the government opposition
but also within the President’s own Alliance. In June a new political
party was founded, the “Alternative for a Republic of Equals” (ARI,
Alternativa por una República de Iguales, which is led by current Radical
Party (UCR, Unión Cívica Radical) deputy for the Chaco province in the
Assembly, Elisa ‘Lilita’ Carrió. The new political force is seen as
filling the vacuum in the centre-left of the political spectrum left by
the departure of former vice president and member of the left-wing Frepaso,
Carlos “Chacho” Alvarez, from the national political stage. As a member
of the Assembly committee investigating money laundering, Carrió has
quickly moved to the limelight of the national political stage as a symbol
of the fight against corruption. The ARI electoral platform for the
October elections is just beginning to take shape but already represents a
notable vote for opposition to the government’s current economic policy
and perceived government laxity on corruption. The party has quickly
gained momentum and will be presenting its own slate of candidates in the
upcoming elections. Former vice president Alvarez has initiated
preliminary conversations with the new opposition force and if he should
decide to join, then ARI is likely to benefit substantially in terms of
credibility and political weight on the national level and the governing
Alliance may lose its majority in the legislature.
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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