Argentina to see economic growth slow in 2014 says IMF

The IMF Report comes two days before a national strike as unions fret about surging inflation.

Argentina to see economic growth slow in 2014 says IMF

World Bulletin / News Desk

The International Monetary Fund said Tuesday that Argentina’s economy is poised to worsen this year, adding to residents’ concerns two days before a national strike.

The Washington D.C. based lender said that the economy is suffering from rising inflation, a weakening currency, slowing activity and high uncertainty.

Activity “is expected to slow markedly during 2014, though the outlook is subject to high uncertainty,” the IMF said in its World Economic Outlook report. It expects the economy to grow 0.5% this year and 1% in 2015, down from 4.3% in 2013.

The country’s economy started slowing in 2012 after recovering robustly at an average of 8% a year from the 2001-02 crisis, helped largely by the rebound from crisis lows and high international prices and demand for its main export: soybeans.

However, manufacturing capacity didn’t keep up with a boom in consumption, leading to shortages and a hike in prices. The government failed to cut spending or encourage enough investment to keep a lid on inflation, turning instead to price controls and heavy-handed threats against companies for not producing enough or marking their prices too high.

This brought a surge in inflation, which has averaged 25% a year since 2010 and this year quickened to 35%, according to a median estimate of private economists calculated by opposition lawmakers.

“Persistently loose macroeconomic policies have generated high inflation and a drain on official foreign exchange reserves,” the IMF said. “Administrative measures taken to manage domestic and external imbalances, including controls on prices, exchange rates and trade are weighing further on confidence and activity.”

President Cristina Fernandez de Kirchner, who has ruled since 2007, started to adjust her economic policies late last year, bringing on a new economic minister and central bank president. The new economic team has deepened price controls, raised interest rates and cut some spending, including peeling back hefty subsidies on gas and water utilities.

That won’t be enough to stave off a sharp economic slowdown this year, the IMF said. With public confidence in the government and the economy on the decline, the IMF said it expects “a disorderly adjustment” this year.

The IMF expects unemployment to increase to 7.6% in 2014 from 7.1% in 2013, and then remain steady in 2015.

That could stir up social tension in the country, with labor unions already preparing for a national strike this Thursday to demand higher wages as surging inflation digs into spending power and raises concerns of job losses.

Last Mod: 09 Nisan 2014, 11:56
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