Cardarelli: "The economy will begin its gradual recovery in 2019 with the growth of confidence"

The Head of Mission in Argentina of the International Monetary Fund (


IMF
), Roberto Cardarelli, predicted that the economy would begin its gradual recovery in 2019 and 2020 "with the growth of confidence, the cost of capital drops with inflation and exports increase through a strong growth of major trading partners of Argentina. "

The Italian economist has referred to the scenario that led Argentina to address the IMF and request a reserve program $ 50 billion. He did it through a report uploaded to his official website

Why did Argentina decide to go to the IMF?

Argentina approached the IMF in mid-May, when a series of shocks combined with economic vulnerabilities led to a change in the mood of the market that led to heavy pressure on the peso , an increase in country risks and liquidity risks in the short term. Investors started selling their badets in pesos and the government started having more problems paying their bills.

What goals does the new economic plan want to achieve?

Argentina's economic plan aims to restore market confidence and reduce tensions over the country's ability to pay its bills. For this, the government is committed to an economic program that reduces lending, establishes a firm path to reduce public debt and reinforces the credibility of the inflation targets set by the government.


Central Bank

At the same time, the plan aims to protect the most vulnerable members of society from the inevitable negative effects that spending cuts will have on the economy. In the end, the goal of the program is to improve the conditions for stronger, more sustainable and more equitable growth for the benefit of all Argentines.

A key objective is to reduce the budget deficit. How does the government intend to achieve this?

Yes, the
The government's goal is to reach the primary balance – the balance between income and expenditure at the federal level that does not include interest payments – of This will happen one year before the initial announcement of the government and will be based on measures to reduce government spending at the federal level. These measures include, for example, further reductions in energy subsidies, a decrease in salary expenditures and a reduction in transfers to provinces and public enterprises.

There are also tax measures – particularly the suspension of previously announced tax cuts – but this is only a small part of fiscal rebalancing.

How will the government protect social spending under this plan?

The government has proposed some measures that would help the most vulnerable. First, the program establishes a minimum amount of federal government spending for a few well-targeted and highly effective social badistance programs, such as cash transfers that reach the majority of the poor and the vulnerable.

If the economy deteriorates, the government can increase spending up to 0.2% of gross domestic product ($ 30 billion) per calendar year, as it believes in the budget. And thirdly, the government can decide to take measures to protect people who are not sufficiently covered by the existing social safety net.

What will be the objective of monetary policy and why is it important for the country to maintain a flexible exchange rate?

The government is committed to a regime of goals of


inflation
with a floating exchange rate. He also announced some changes that will enhance the credibility of the monetary policy framework. In particular, the Central Bank has adopted a new, more credible approach to targeting inflation (for example, the target for the end of 2019 has gone from 10% to 17%).

The government also announced a series of measures they will strengthen the independence of the Central Bank, including the immediate cessation of direct and indirect transfers to the Treasury and the intention to send Congress a new letter to the Bank that will strengthen the autonomy of its operations.

We believe this plan has a good chance of gradually reducing inflation. And this will allow the exchange rate to adjust according to investor confidence and cushion shocks, because fluctuations will prevent external shocks from affecting economic activity.

Independence of the Central Bank. Why?

One of the reasons investors lost confidence in the Argentine economy is the perception that the Central Bank had
lost its independence in early 2018, when the monetary entity reduced interest rates. This happened at a time when inflation expectations were already well above the targets that the Central Bank had adjusted only a few weeks earlier. These decisions led to a very rapid depreciation of the peso and questioned the independence of the agency as well as its level of commitment to reduce inflation. An essential part of the new plan is to guarantee the financial and operational autonomy of the Central

When do you think that the Argentine economy will resume the path of growth?

We believe that after a strong first quarter, Argentina will have fall of activity in the second and third quarters of 2018. The country is mired in a multi-year drought that is affecting agricultural production and the crisis of recent weeks is also damaging to inflation and investor confidence. [19659017Nousprévoyonsquelacroissancesestabiliseraauderniertrimestrede2018Nousprévoyonsquel'économieamorcerasareprisegraduelleen2019eten2020àmesurequelaconfianceseraffermiraquelecoûtducapitalbaisseraavecl'inflationetquelebadportationsaugmenterontgrâceàlacroissancedesprincipauxpartenairescommerciauxdel'Argentina-leBrésillesÉtats-UnisetlaChine-

How would you say that the & # 39; Argentina is different aujourd & # 39; hui that & # 39; it s & # 39; Was it 15 years ago? Has the IMF changed too?

Yes, the conditions are quite different for both. The Argentine economy is less vulnerable than before the recession of the early 2000s. The exchange rate regime is a big change.
Now it floats, it's not fixed, so it works like a shock absorber. Banks and the private sector also operate without borrowing money in foreign currency, so their balance sheets are not exposed to depreciation of the peso. Beyond these significant changes, the government has launched a series of pro-business measures that have contributed to the growth of the economy over the past seven quarters.

The IMF has also changed. Our support to Argentina's economic plan puts greater emphasis on the need to strengthen the social security network and includes measures to increase women's participation in the workforce. Doing this is not only a moral imperative, it is also essential to ensure that any plan to stabilize the economy is accepted by all, which means that it is more likely to succeed.

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