Get more Mail & Guardian
Subscribe or Login

Key things to watch in Argentina after IMF boosts loan

Through-the-roof inflation, rising unemployment, recession and social upheaval have marked the economic crisis in Argentina, which on Wednesday secured a new loan agreement with the IMF.

Here are the key things to watch for as President Mauricio Macri’s beleaguered government seeks to emerge from the crisis armed with an increased $57-billion loan.

On the slide

Analysts say the first challenge is to stabilise the markets and boost economic output. The renegotiated IMF deal is designed to ease concerns over Argentina’s loan financing needs and currency fluctuations.

However, “the next few months will be economically challenging for Argentina even if the deal accomplishes these goals,” said Daniel Kerner, Latin America specialist at Eurasia Group.

Economy Minister Nicolas Dujovne admitted that Latin America’s third-largest economy has been fighting a losing battle with recession. GDP fell 4.2% in the second quarter compared to the same period in 2017.

Industrial output saw its third consecutive monthly decline in July, down 5.7%, and further disappointing data is expected for August and September. The government estimates the economy with contract by 2% this year.

The economic forecast has tumbled from growth of 3.5% of GDP to 0.5% shrinkage for 2019 after drought hit key agricultural exports.

Sky high

The prices of essential products, especially food items, continue to increase as inflation has accelerated since April, fuelled by pressure on the peso that saw it shed half its value against the dollar since the beginning of the year.

The central bank raised its interest rates to 60%, but that and other steps have brought only temporary relief.

The knock-on effect on prices of household goods and fuel formed an inflationary cocktail that has withered the purchasing power of ordinary Argentines.

Annual inflation to August was over 24% but economists are predicting it will hit more than 40% by December.

Social unrest

The country is vulnerable to social upheaval and a general strike on Tuesday brought the country to a standstill.

Unemployment has risen to nearly 10% as Marci sought to streamline the bloated public sector.

Unions are up in arms and are demanding the government row back on pension cuts, tax increases, and the closure of factories they say have been par for the course since market-friendly Macri came to power in 2015.

There are constant protests on the streets of Buenos Aires against austerity measures imposed by the IMF, which has reawakened painful memories of previous bailouts.

The still-powerful Catholic Church has sounded the alarm over a growing number of people using food handouts to feed their families.

The percentage of the population living under the poverty threshold was 25.7%, according to the most recent figures.

Budget deficit

The government has agreed to cut back on spending — Macri has halved the number of government ministries — and pledged to balance the budget in 2019, a year sooner than agreed in June at the outset of the IMF loan.

But many analysts see the plan as highly ambitious — the deficit was 3.9% in 2017, and projected to be 2.7% this year — and likely to increase union opposition on the streets.

Elections in 2019

The crisis doesn’t bode well for Macri’s re-election prospects next year. Argentina goes to the polls to elect a new president in October 2019 and the centre-right leader confirmed in New York this week that he would seek a second four-year term.

His popularity rating is low, but he retains the support of about a fifth of the electorate and is aided by a divided leftist opposition

Its leader, former president Cristina Kirchner, is still the most popular politician in Argentina despite a string of corruption scandals. She is expected to be Macri’s main challenger, if she can survive the courts.

An opinion poll by the University of San Andres shows Macri’s rating fell by half over the past nine months, from 66% last October to 34% in August.

© Agence France-Presse

Vote for an informed choice

We’re dropping the paywall this week so that everyone can access all our stories for free, and access the information they need in the run up to the local government elections. To follow the news, sign up to our daily elections newsletter for the latest updates and analysis.

If our coverage helps inform your decision, cast your vote for an informed public and join our subscriber community. Right now, you can a full year’s access for just R510. Subscribers get access to all our best journalism, subscriber-only newsletters, events and a weekly cryptic crossword.

Agency
External source

Related stories

WELCOME TO YOUR M&G

Already a subscriber? Sign in here

Advertising

Latest stories

Eskom will try to avoid blackouts during local government elections

Chief operating officer Jan Oberholzer said the ailing state power utility’s staff would be on standby as South Africans cast their votes on 1 November

‘Terribly scary’: Dysfunctional municipalities are a threat to South Africa’s...

The country’s local governments are a drag on investment, a strain on the fiscus and pose a critical sovereign risk

Local elections 2021: A visual guide on what to expect

What are the biggest election issues where you live? M&G explains all

South Africa must approach its energy transition pragmatically

A sensible climate policy must balance the imperative of decarbonisation, socioeconomic policy and security of supply considerations
Advertising

press releases

Loading latest Press Releases…
×