Country Report Argentina January 2009

Outlook for 2009-10

• Notwithstanding the scope for patronage that nationalisation of the private pension system in November may facilitate, the president, Cristina Fernandez de Kirchner, is unlikely to hold on to the political initiative for long.
• The president faces opposition, including from within the ruling Partido Justicialista (PJ), and will almost certainly suffer a defeat in the mid-term October 2009 congressional election.
• In an attempt to prevent the economy slipping further into recession, the government announced a range of counter-cyclical measures.
• However, given quickly declining business and consumer confidence, the government package will have a limited effect and we retain our forecast for a sharp economic slowdown in the forecast period.
• We now anticipate a shaper deterioration of the fiscal balance in the forecast period as a result of the costly fiscal measures recently announced by the government.
• We have reduced our forecast for year-end inflation in 2009 from 10% to 9.4%, given our expectations for a sharp slowdown in private consumption.
• We expect the peso to weaken in 2009 before the pace of depreciation slows in 2010. We now expect a lower current-account surplus in 2009 than previously forecast (1.5% of GDP down from 1.9% previously).

Monthly review

• A year after taking office, the president, Cristina Fernandez de Kirchner, of the Partido Justicialista (PJ, also know as the Peronist Party), continues to see her popularity declining amid a sharp economic slowdown.
• Recent measures taken by the Kirchners, notably the exclusion of soyabeans from a recent cut in export taxes, have led to renewed tensions with farmers.
• New corruption allegations against the Kirchners have emerged.
• The government announced a series of counter-cyclical economic measures, including increased spending on public works, new subsidised credit lines, a tax moratorium. These are expected to have only limited effect.
• The Central Bank has resumed its policy of purchasing US dollars in order to keep the peso weak and preserve export competitiveness.
• Recently divulged national accounts data confirmed that the economy was already decelerating sharply in the third quarter.
• Export volumes contracted sharply in November owing to the global downturn.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;20
NAICS Code: 52;311

This report covers the following industry codes:
SIC Code: 60;20
NAICS Code: 52;311