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Argentina’s gov’t to present new budget amid economic woes

Argentina’s gov’t to present new budget amid economic woes

Finance Minister Hernan Lacunza speaks during a press conference on Aug. 20, 2019, in Buenos Aires, Argentina. EPA-EFE FILE/Juan Ignacio Roncoroni

EFE

Finance Minister Hernan Lacunza will present the proposed 2020 budget to the Argentine Congress this week, a budget that will have to be implemented by whoever wins the presidential election in October.

Lacunza is scheduled to appear on Monday before the lower house’s budget committee, which will probably not debate the proposed budget until after next month’s presidential vote.

President Mauricio Macri, who is seeking re-election, will take on Peronist Alberto Fernandez in the Oct. 27 election.

Lacunza will explain the economic assumptions made in preparing the budget, which Finance Ministry officials said included a 2.6 percent contraction of the gross domestic product (GDP) this year and 1 percent economic growth in 2020.

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If the economy grows in 2020, Argentina would emerge from the recession that started in April 2018.

The Macri administration’s 2020 growth projection runs counter to the Central Bank’s monthly survey of private sector economists, who expect Argentina’s GDP to contract 1.1 percent next year.

The administration’s inflation estimates, however, are closer to those of private sector analysts.

The proposed 2020 budget assumes that Argentina will finish 2019 with an inflation rate of 53 percent and will end 2020 with a 34 percent inflation rate.

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The government estimates that the average exchange rate of the peso to the dollar will be 48 at the end of this year, while the current exchange rate is 57.50 pesos per dollar.

The proposed 2020 budget assumes that the exchange rate will average 67 pesos per dollar in 2020.

The Finance Ministry estimates that Argentina will end 2019 with a primary deficit equivalent to 0.50 percent of GDP, a figure close to the target agreed to with the International Monetary Fund (IMF) last year.

Under the terms of the $56.3 billion stand-by agreement signed with the IMF, the Macri administration had to impose sharp budget cuts.

The Macri administration has not released the deficit target for next year, but former Finance Minister Nicolas Dujovne, who resigned in August amid turmoil in the financial markets, had projected a primary budget surplus equivalent to 1 percent of GDP.

Argentina’s debt issuance plans for 2020 will be affected by the Treasury’s recent refinancing of short-term bonds held by institutional investors.

Argentina’s GDP fell 2.5 percent in 2018, according to the latest official figures available, and the economy contracted by 3.1 percent on a year-on-year basis in the January-May 2019 period.

The recession has been accompanied by a 47 percent inflation rate in 2018 and an inflation rate of 25.1 percent during the first seven months of this year.

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In the Aug. 11 primaries, Fernandez finished 15 percentage points ahead of Macri.

Fernandez and vice presidential running mate Sen. Cristina Fernandez, who governed Argentina from 2007 to 2015, got 47 percent of the vote on the ticket of the Peronist Frente de Todos.

The 60-year-old Macri, who headed the ticket of the Juntos por el Cambio party, received just 32 percent of the vote, suffering a serious blow to his re-election chances.

Argentina’s next president will be sworn in on Dec. 10 for a four-year term. EFE

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