Argentina budget to forecast 3.5 percent 2017 growth: Senate leader

August 31, 2016 4:31 PM EDT

Get inside Wall Street with StreetInsider Premium. Claim your 2-week free trial here.

By Nicolás Misculin

BUENOS AIRES (Reuters) - Argentina's government will forecast much a sharply lower inflation rate and strong economic recovery in 2017 when it presents its first budget bill in mid September, the government's leader in the Senate told Reuters.

The economy is expected to climb out of recession and grow at least 3.5 percent in 2017 while inflation will likely drop from around 40 percent currently to 17 percent next year, Senate leader Federico Pinedo said on Wednesday.

He said the optimistic forecasts were made possibly by economic policy changes from President Mauricio Macri, who since taking office in December has ended a dispute with hold-out creditors and opened Argentina to investors.

"Our budget will provide for expansion of the economy on the investment side, especially in infrastructure, and on the consumption side," he said, citing a planned payment of 70,000 pesos ($4,698) to retirees as a measure that would spur consumption.

Spending targets agreed on with the opposition will determine next year's fiscal deficit, Pinedo said, calling the opposition's attitude in Congress this year "responsible".

The economic forecasts are the same numbers Macri gave Reuters in an Aug. 10 interview, when he said sectors like farming are already responding to the dramatic policy changes.

Macri has pushed through measures such as devaluing the local currency, eliminating subsidies and ending export curbs and taxes on wheat and corn, but economic growth has not yet returned.

Data on Wednesday showed industrial production contracted 7.9 percent in July from a year earlier, marking the recession-hit country's sixth straight month of shrinking output.

The government statistics agency said gross domestic product shrank 0.7 percent in the first quarter of the year from the last quarter of 2015, confirming a third consecutive quarter of negative growth.

Macri's government is counting on a tax amnesty program allowing Argentines to disclose previously undeclared funds and be taxed at a preferable rate to provide up to $80 billion and kickstart the economy.

Congress is also debating legislation to improve relations between private investors and the state.

"It is basically a mechanism to distribute risks between the state and the private sector," Pinedo said.

Inflation in Argentina was expected at 40.2 percent in 2016, one of the world's highest rates, and 19.4 percent in 2017, according to a recent central bank poll of analysts.

Macri's Cabinet Chief Marcos Peña said last week that gross domestic product will likely contract by 1 percent in 2016.

($1 = 14.9 pesos)

(Reporting by Nicolas Misculin; Writing by Caroline Stauffer; Editing by David Gregorio)

Serious News for Serious Traders! Try Premium Free!

You May Also Be Interested In

Related Categories


Related Entities

Industrial Production

Add Your Comment