Country Report Argentina May 2009

Summary

The June 2009 congressional poll is expected to leave Cristina Fernandez de Kirchner a lame-duck president until the 2011 general elections; mounting social and political tensions carry the risk that she will fail to see out her term.
Global recession will combine with domestic political and policy uncertainty, causing trade conditions to weaken and investment to fall. As a result, the economy is forecast to contract by 3.5% in 2009 and to grow weakly in 2010.
Although the government will be able to remain current on its "agreed" debt obligations ahead of the June election, the outlook for the public finances and political stability will darken thereafter, raising the risk of a new default.
Weaker agricultural export earnings and recession will narrow the primary surplus to 1.2% of GDP in 2009, leading to an overall budget deficit of 1.1%, with only a modest improvement in 2010.
Unofficially measured inflation will ease to 10-15% in 2009, as private demand falls. Assuming a depreciation of the peso in the second half of the year, the official rate will end 2009 at 9.3%, and 2010 at 9.5%.
The peso will undergo a depreciation after the end-June elections, either because of capital flight or a policy-led adjustment designed to boost fiscal revenue and prevent the current-account surplus from narrowing too much.

To bolster the ruling party's ticket, Ms Fernandez's husband and predecessor as president, Nestor Kirchner, has decided to run for Senate in Buenos Aires province, a district which he must win in order to bolster their position.
At the same time, pro-Kirchner mayors and governors are being encouraged to run for the legislature as testimonial? candidateswith no intention of actually serving. This controversial ploy has not helped to improve the Kirchners' poll ratings.
Tensions have appeared in recent weeks among leaders of Union-Pro, an electoral alliance made up of dissident Peronists and members of Pro, a centre-right party, stemming from conflicting ambitions and ideologies.
The combination of pre-election pressure on spending and the impact of deteriorating economic conditions on revenue produced another dramatic fall in the primary fiscal surplus in March of more than 60% year on year.
The latest trade data point to a downturn. Although the trade surplus actually widened in February, this reflected a much sharper contraction in imports (of 37%) than in exports (24%), rather than a positive export performance.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37
NAICS Code: 336