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Argentine Budget Sees 3.4% GDP Growth in 2012, 4.4% in 2013

Argentina’s economy will expand by 4.4 percent in 2013 after growing 3.4 percent this year, promising payments to holders of securities linked to economic growth for the next two years.

South America’s second-biggest economy has to expand at least 3.3 percent this year and 3.2 in 2013 to trigger a payment to owners of warrants tied to the gross domestic product. Growth was 2.5 percent in the first half of the year, Economy Minister Hernan Lorenzino said.

“Argentina’s economy continues growing in an economic international context where some important regions in the world are in recession,” Lorenzino said in a presentation of the 2013 budget proposal to Congress. “Domestic consumption and investment will fuel the country’s growth next year.”

President Cristina Fernandez de Kirchner has stimulated domestic consumption this year by condoning average wage increases of 25 percent and raising pension payments and handouts to poor families as demand from Brazil, the country’s main trade partner, slowed. In the second quarter, expansion slowed to 0.5 percent from a year earlier, according to the median estimate of 10 economists surveyed by Bloomberg.

The national statistics agency will report second-quarter GDP at 4 p.m. local time tomorrow .

Warrants tied to economic growth have risen 21 percent in the past month to 13.28 cents as of 2:06 p.m. local time.

Debt Payments

Debt payments will rise to 55.6 billion pesos ($11.9 billion) in 2013 from 45.1 billion pesos this year. The government will spend as much as $8 billion of the central bank’s international reserves to pay debt in 2013, according to the budget plan. This year it plans to draw $5.7 billion of reserves after using $7.5 billion of the funds in 2011.

“This is bread for today, hunger for tomorrow,” said opposition lawmaker Alfonso Prat-Gay, a former central bank president. “The $24 billion in reserves that have been taken won’t come back ever again. The government is paying debt issuing pesos, paying debt with inflation.”

Tax revenue will increase 23 percent, enabling the government to obtain a budget surplus of 0.02 percent of gross domestic product in 2013, compared with a deficit of 1.58 percent of GDP this year, Lorenzino said.

Government spending will continue to rise, boosting domestic consumption, Lorenzino said. According to the bill posted on Congress’s website today, Fernandez will increase spending by 16 percent to 628.6 billion pesos.

Record Harvest

A record grains and soybean harvest will boost next year’s trade surplus, which will widen to $13.3 billion from $12.2 billion in 2012, Lorenzino added.

The peso will have an average value of 5.1 per dollar, compared with 4.68 per dollar today, while consumer prices will rise 10.8%, according to the budget proposal.

The International Monetary Fund’s board of directors this week gave Argentina until Dec. 17 to respond to concerns about the quality of its official inflation and GDP data. If the deadline is missed, the board can issue a declaration of censure, a warning that has never been used and that means sanctions may be applied if the concerns aren’t addressed.

Since former President Nestor Kirchner replaced staff at the national statistics institute, known as Indec, in 2007, Argentina has reported average inflation of 8.8 percent a year, versus the 23 percent rate estimated by independent economists.

“The only international lender in the world that still has doubts about the statistics in Argentina is the IMF,” Prat-Gay said. “All the other ones and even government officials know that Indec lies.”

To contact the reporters on this story: Eliana Raszewski in Buenos Aires at eraszewski@bloomberg.net; Camila Russo in Buenos Aires at crusso15@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

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