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Reuters
28-07-2025
- Business
- Reuters
Argentina economic recovery to moderate in the run-up to October vote : Reuters poll
July 28 (Reuters) - Argentina's ongoing economic recovery will moderate to a normal pace in the run-up to October's mid-term legislative election, a Reuters poll showed. At the start of 2025, Latin America's No. 3 economy behind Brazil and Mexico picked up strongly following a two-year recession that capped more than a decade of poor performance. Consumption got a boost from a drastic fall in inflation thanks to President Javier Milei government's "chainsaw" drive that shored up fiscal results, while facing intense social criticism. But Argentines are cutting some spending and investment plans amid a slackening labor market, resurging currency worries and tighter credit conditions. Gross domestic product (GDP) is set to expand at a still-decent 3.4% rate in 2026 from an expected 5.0% this year, according to the median estimate of 28 analysts polled between July 21-25. Inflation is forecast to fall to 23% in 2026 from a projected 42% this year. In 2024, consumer prices shot up 237%, the worst since 1991 when Argentina was experiencing a similar economic shock. "Growth stagnated in recent months as a result of flattening real wages, increased uncertainty and the slowdown in credit from a restrictive monetary policy," said Federico Filippini, head of research at Adcap. "Next year's forecasts are heavily influenced by the upcoming election and the government's ability to advance its reform agenda." Economic activity missed analyst calls in May on yearly terms and virtually stalled against April's levels, the latest data from a leading indicator showed. Businesses are feeling the pinch of high interest rates from the adoption of a market-based money supply scheme in line with a $20 billion International Monetary Fund (IMF) program signed in April. The implementation of the new framework also impacted local assets shaken by foreign exchange tensions caused by a drying up of U.S. dollar inflows from agricultural exports. "Volatility will continue, but less than in recent weeks, with interest rates moving more freely and agricultural exports remaining low until year-end," said Fausto Spotorno, economist at Orlando Ferreres. An expected $2 billion IMF disbursement should contribute to calm market anxiety before October's vote by bolstering Argentina's depleted international reserves. Unable to tap global debt markets due to the country's steep risk premium, the government has received some additional relief through special bond sales as well as bank "repo" deals. However, surging imports from Milei's economic opening keep the central bank's balance sheet under pressure, despite an increase in energy and mining exports. To address the issue, many Peronists campaigning for the October election want to return to a policy mix of devaluation, protectionism and industrial promotion. Voters rejected this approach at the ballot box in 2023, when Milei's La Libertad Avanza party won a presidential election vowing to trim the size of the state. Now his LLA has an advantage in polls over the Peronists, whose internal rivalries flared up after their leader Cristina Fernandez de Kirchner was put under house arrest for corruption. Investors hope Milei will push the "libertarian" agenda aggressively if his party wins more seats in Congress, recreating Argentina's economic transformation of the 1990s. "We may see a re-discussion of reforms that were attempted during the current legislature but failed... for example, comprehensive labor and tax reforms, potentially also a pensions reform," Citi analysts wrote in a report. "The new Congress could also give impulse to privatizations of some state companies that may require only a simple majority – Banco Nacion, (water utility) AySA and Aerolineas Argentinas." (Other stories from the Reuters global economic poll)
Mint
21-04-2025
- Business
- Mint
Argentinas peso regains strength, hits level before FX controls eased
(Updates with context and background) BUENOS AIRES, April 21 (Reuters) - Argentina's peso strengthened over 5% on Monday, surprising traders and regaining levels in line with where the currency was before capital controls were abruptly lifted at the start of last week. The peso tumbled last week, before making up some ground, after the government undid large parts of years-long capital controls and shifted the currency from a controlled "crawling peg" to a far wider trading band. The move was part of a wider reform package and tied to a $20 billion front-loaded deal with the IMF, which allowed the government to obtain over half the total funds last week and quench the central bank's depleted foreign reserves. President Javier Milei is aiming for farm export revenues and a shortage of pesos domestically to lead to a short-term appreciation of the local currency, bringing it toward the lower end of the trading band between 1,000 and 1,400 pesos. In trading on Monday, the peso strengthened 5.14% to some 1,070 per dollar at 11 a.m. (1400 GMT), before losing some gains to trade at 1,080 pesos per dollar by 1629 GMT. The peso's gains narrowed the gap with parallel rates that have been widely used in recent years due to the tough limits on access to official markets. "The new exchange rate scheme has made a good debut, and we cannot rule out the dollar approaching the floor of the band," said economist Roberto Geretto of Adcap asset management group in Buenos Aires. Milei said last week that the central bank - which needs to accumulate billions of dollars of hard currency as part of the IMF deal - would not intervene in the forex market unless the peso breaks below the 1,000 per dollar trading band floor. Peso futures, which suggest where the currency is heading, weakened sharply last week after the IMF deal was confirmed and the controls eased, but have since strengthened again, suggesting traders are getting more bullish about its outlook. (Reporting by Walter Bianchi; Writing by Brendan O'Boyle; Editing by Natalia Siniawski and Ros Russell) First Published: 21 Apr 2025, 10:07 PM IST
