Argentine Central Bank Sees Lower 2012 Growth Than Budget

Argentina’s central bank forecasts economic expansion of 2 percent this year, less than the 3.4 percent estimated in the latest government budget, as developed economies struggle to recover from recession.

Growth next year will be 4.6 percent, according to the central bank’s annual program for 2013 published on its website. That compares with an estimated expansion of 4.4 percent in the budget approved by congress on Nov. 1.

Argentina will maintain currency controls implemented by President Cristina Fernandez de Kirchner after her re-election last year as it aims to boost reserves, according to the program.

Currency controls were implemented “so foreign currency is applied to operations linked to productive activity and the payment of private and public debt,” the bank says. “These regulations will remain current in 2013.”

The measures require currency purchases to be authorized by the federal tax agency, which approves or rejects requests according to undisclosed guidelines. The purchase of dollars for savings and property purchases is banned outright.

The central bank forecasts it will buy a net $12.5 billion next year, which will allow it to increase international reserves, “even after paying debt denominated in foreign currency.”

The bank has bought $8.9 billion this year, while reserves dropped to $43.4 billion from $46.2 billion. Imports and exports will pick up next year, resulting in a trade surplus that exceeds $10 billion, the central bank forecasts.

Currency Market

The bank, which is run by Mercedes Marco del Pont, will continue to buy and sell dollars in the currency market to avoid sharp changes in the value of the peso, according to the program.

“The central bank will continue to intervene in the exchange market according to macroeconomic needs and in order to moderate the volatility of the exchange rate,” the program says.

The Treasury will maintain its dependence on state agencies and the central bank for most of its financing needs, the central bank says. The bank has transferred a record 101.4 billion pesos ($21 billion) to the government so far this year.

In March, Argentina changed the central bank charter to give the government unlimited use of reserves, eliminating a requirement that the bank must maintain funds equal to or exceeding the monetary base. The measure enables the government to continue using reserves to pay debt and allows the bank to boost lending to the Treasury while helping finance the government’s budget gap.

“The objective of the bank is to promote, to the extent of its powers and within the policies established by the national government, monetary stability, financial stability, employment and economic development with social equity,” according to the 2013 program.

To contact the reporter on this story: Camila Russo in Buenos Aires at crusso15@bloomberg.net

To contact the editor responsible for this story: Philip Sanders at psanders@bloomberg.net

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