The Monetary Fund already sees the storm come | The org …

The Monetary Fund foresees greater volatility as the elections draw closer, which could put an end to trade and the financial stability of recent weeks. "The financing needs are high and a loss of market confidence can quickly translate into a higher risk rate," says the document prepared by the agency's technicians as part of the fourth revision of the 39, confirmation agreement. When updating its forecasts, the multilateral agency forecast a decline of 1.3% of GDP this year, while it had calculated a decrease of 1.2% in April. Next year, he said it would only increase by 1.1%, compared with the 2.2% forecast in the previous badessment. The IMF also raised its inflation estimate by ten points this year by setting it at 40.2%, while projecting a double-digit unemployment rate (10% this year and 10.1%). next year).

The document, prepared by the agency's technicians with information until July 3, renewed its support for the country's compliance with the fiscal adjustment plans in order to maintain a "fiscal discipline" but mindful of the risks badociated with persistent inflation, the reduction in the average life of the public debt resulting from increasingly shorter renovations and a situation of recession or almost zero growth up to the end. 2020. The paper recognizes that the reduction in the fiscal front has had a negative impact on the prospects for economic recovery. "With persistent inflation, real interest rates should remain high longer, which will affect domestic demand and imports," the report insists. He pointed out that "the economic activity is still weakened in the first quarter, but that the recession will probably be over." At the same time, he acknowledges that inflation has allowed the national government to post better tax collection in nominal terms.

"The growth forecast for 2019-20 has been revised downwards, with the 2019 revision (negative 1.3%) reflecting weak growth, especially domestic demand and imports, in the first quarter and revisions downward growth for regional trading partners, "says the agency. "Given the persistence of inflation, real interest rates are expected to remain higher over the long term, which will again affect domestic demand and imports, which will result in a downward revision of inflation. growth in 2020 (from 2.2 to 1.1%), "he adds. The Fund expects inflation to end the year at around 40% (well above the 30.5% forecast at the time of the third revision) due to rising nominal wages and the significant increase in growth forecasts. l & # 39; inflation.

In the first revision, in June 2018, the agency estimated for this year GDP growth of 1.5%, inflation of 17% and unemployment of 8.6%, but all these figures were in memory. Last week, the acting CEO of the Fund, David Lipton, confirmed that the entity had approved a new disbursement, amounting to $ 5,400 million. "The completion of the revision allows the authorities to access 3900 billion SDRs (special drawing rights), or about 5400 million dollars, bringing the total disbursements since about 44 201 000 since June 2018 ", says the document.

"High interest rates, seasonal inflows of dollars from the agricultural sector, greater clarity on the October election candidates and the announcement made by the BCRA to be able to step in to support the peso in case of disorderly market conditions helped to better anchor the exchange rate, "says the report. However, doubts are growing because of a possible exchange rate delay in the face of inflation above 40%. "The modest appreciation of the exchange rate and the constant tightening of fiscal and monetary policy have contributed to a decline in monthly inflation in April and May. Moreover, the fiscal position has been favored by higher inflation than expected (increase in nominal tax revenues) and a cautious approach to spending, "he explains.

"The risks for the program are high, the toughest election period yet to come," said the IMF staff, adding that the official goal should be to focus efforts on extending deadlines with new issues. on the contrary: "average debt maturities have been shortened, increasing financing needs in the months leading up to the election". "Gross financing requirements are high and uncertain market confidence can quickly translate into larger sovereign spreads, difficulties in meeting fiscal financing needs, changing investor preferences for peso badets, and pressures on investors – the exchange rate (which is directly reintroduced into the debt dynamics), "concludes the 83-page document.