With industry on the decline throughout the second quarter, it is now just a question of how long the agricultural, construction, and services sectors can continue to drive Argentina's economy. Fernando Cerro, a director at the statistics institute, Indec, says that if activity remains at its current level he expects the economy to grow by 4.9% for the full year -a prediction in line with the government's forecast of 4.5%-5.0% expansion.
Meanwhile, according to a document leaked to the newspaper Clarín over the weekend, the Argentine government is formulating the budget for next year based on an assumption of 4.5% economic growth.
The budget, which will be announced in September, will also assume inflation of 10%, an exchange rate of Arg$2.72 to the US dollar, and a primary fiscal surplus equivalent to 2.5% of GDP.
This latter figure is especially significant, given that the IMF at present wants a surplus of 3.0% and is expected to push for a surplus of 3.5%-4.0% during its coming visit.
As it is, Buenos Aires will struggle to meet its own target if the IMF forces it to remove lucrative taxes on exports. This duty earned US$4.7bn for the government during the first half of 2003, and together with a tax on the current account, was worth 21% of total revenues for the period.
A source in the treasury told the newspaper La Nación that the government was considering reducing the export tax in three stages next year.
Industrial output in Argentina in June was 0.3% lower than in May. This was the third consecutive month of declining production. The blame is being put on the relative strength of the peso.
End of preview - This article contains approximately 356 words.
Subscribers: Log in now to read the full article
Not a Subscriber?
Choose from one of the following options
