Argentina Economic Outlook
March 2005
Economic emergency was surpassed Relations with the multilateral agencies reestablished Public debt has been restructured Exchange rate stability and recovery of international reserves Low inflation rate achieved (hyperinflation was avoided) Recovery of bank deposits and interest rates at low levels Recovery of economic activity Surplus of fiscal accounts Improvement in the labor market and poverty conditions External sector: record level of trade balance surplus
Argentina after the crisis EXCHANGE RATE AND INTERNATIONAL RESERVES 21,5
4.5 International reserves US Dollar
4.0
3.0
15,5
2.5 13,5
2.0
11,5
1.5
9,5
1.0
7,5
0.5
Source: CEI based on BCRA data.
(ARS x USD)
3.5
17,5
de c0 fe 1 b0 ap 2 r-0 ju 2 n0 au 2 g0 oc 2 t-0 de 2 c0 fe 2 b0 ap 3 r-0 ju 3 n0 au 3 g0 oc 3 t-0 de 3 c0 fe 3 b0 ap 4 r-0 ju 4 n04
(USD billions)
19,5
Argentina after the crisis CONSUMER PRICES 45
35 30 25 20 15 10 5
Source: CEI based on INDEC data.
4 ju l- 0
ja n04 ap r-0 4
ju l-0 3 oc t -0 3
ap r-0 3
ja n03
ju l-0 2 oc t- 0 2
ap r-0 2
0 ja n02
(Annual % var.)
40
Recovery of economic activity REAL GDP
-8% 275,0
-21% 250,0
Source: CEI based on INDEC data.
3 III 0
2 IV 0
I0 2
1 II0
0 III 0
9 IV 9
I9 9
8 II9
7 III 9
IV 9
6
225,0 I9 6
(1993 ARS billions)
300,0
Recovery of economic activity GROWTH DRIVERS (DEMAND SIDE) 20% 10.2%
15% 7.7%
10%
(% contrib. to GDP growth)
11.7% 11.2%
5.4% 5%
-0.2%
0% -5%
-2.0%
-10%
-3.4%
-4.9%
Imports Investment Consumption Exports GDP
-15% -10.5%
-9.8%
-20% -13.5% -25% -16.3% -30% I´01
II´01
III´01 IV´01
I´02
II´02
Source: CEI based on INDEC data.
III´02 IV´02
I´03
II´03
III´03 IV´03
I´04
Recovery of investment GROSS FIXED INVESTMENT
20.0%
16.0%
12.0%
Source: CEI based on INDEC data.
III 03
IV 02
I0 2
II0 1
III 00
IV 99
I9 9
II9 8
III 97
IV 96
8.0% I9 6
(% of GDP)
24.0%
ja n m - 01 a m r-0 ay 1 -0 ju 1 se l-01 p no - 0 1 v ja -01 n m - 02 a m r-0 ay 2 -0 ju 2 se l-02 p no - 0 2 v ja -02 n m - 03 a m r-0 ay 3 -0 ju 3 se l-03 p no -03 v ja -03 n m -04 a m r-0 ay 4 -0 4
(exports and imports) 32,0
24,0
Trade balance
20,0
Exports
16,0
8,0
Source: CEI based on INDEC data.
10,0
Imports 5,0
12,0
0
(trade balance)
Trade balance
(USD billions, accumulated in 12 months) 20,0
28,0 15,0
Remarkable improvement in public accounts NATIONAL PUBLIC SECTOR
3.0%
Primary result in GDP % Tax collection (acumm. in 12 months)
2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5%
Source: CEI based on Treasury Department data.
80,0 70,0 60,0 50,0 40,0 30,0
(Tax collection in ARS billions)
3.5%
90,0
ja n01 ap r-0 1 ju l-0 1 oc t-0 1 ja n02 ap r-0 2 ju l-0 2 oc t -0 2 ja n03 ap r-0 3 ju l-0 3 oc t-0 3 ja n04 ap r-0 4
(Primary result in GDP %)
4.0%
Public debt restructuring PUBLIC DEBT BURDEN 160%
1300%
Public debt (as GDP %) Public debt (as % of revenue)
1100%
(Debt as GDP %)
120% 900% 100% 700% 80% 500% 60% 300%
40% 20%
100% I´00 II´00 III´00IV´00 I´01 II´01 III´01IV´01 I´02 II´02 III´02IV´02 I´03 II´03 III´03IV´03
Source: CEI based on Treasury Department data.
(Debt as % of revenue)
140%
Improvement in the labor market UNEMPLOYMENT RATE (as % of active population)
30% 25% 20% 15% 10% 5% II 02
IV 02
I 03
Source: CEI based on INDEC data.
II 03
III 03
IV 03
I 04
Economic outlook 2003
2004
2005
GDP
% real var.
8.7
8.8
6.5
Consumption
% real var.
7.3
7.0
4.3
Investment
% real var.
38.1
29.0
13.0
Exports
% var.
14.0
12.0
4.0
Imports
% var.
54.0
49.0
12.0
Trade balance
USD billions
15.6
11
11.2
Retail prices
% var. (dec/dec)
4.0
6.5
7.0
Exchange rate
ARS per dollar
2.96
3.0
3.1
Primary result CPS (1)
GDP %
2.9
4.2
4.0
Unemployment rate
% - 4th. quarter
14.5
13.2
12.2
(1) Consolidated Public Sector (CPS): federal, provincial and municipal governments. Source: CEI base on the Market Expectations Survey (BCRA).
Economic Program Mainstay After the economic emergency, the actual stage of the economic program aims at achieving sustainable growth.
Fiscal solvency Prudent monetary framework Pillars
Exchange rate flexibility Consolidation of financial system Aggressive trade policy
Challenges Consolidate fiscal solvency (tax reform, improvement of tax compliance, new scheme of distribution of federal taxes)
Achieve long term price stability (inflation targeting system) Recovery of long term credit International negotiations to expand trade opportunities (MERCOSUR, FTAA, European Union, CAN, WTO, bilaterals).
Full social inclusion
Concluding remarks Economic emergency generated by the 19982002 crisis has been surpassed.
2004 ended with an expansion of the economic activity in a context of low inflation, exchange rate stability, improvement in the labor market and good fiscal performance.
The outlook for 2005 is also very optimistic.