IMF: The recession will end in the second quarter

The technical team visiting the country is satisfied with the status of the plan. gives the freedom to stop the decline of the dollar

International Monetary Fund
(IMF), who began his second technical mission to Argentina the day before yesterday, felt that the new monetary policy promoted by the implementation of the new Stand-By Arrangement (SBA) by


Central Bank
(BCRA) uses to stabilize the peso and control inflation and expects the economy to experience a limited recession, which will end in the second quarter of 2019 , at the beginning of a gradual but uninterrupted recovery process.

The IMF visit, which will last until Friday and will also include meetings with trade unions, academics and some opposition parties, comes after the
The Multilateral Board of Directors approved a disbursement of US $ 56,000 million several weeks ago to limit exchange rate volatility suffered by the country since the end of April and to doubt its ability to pay. In return, the government is committed to advancing the zero fiscal deficit target for next year and to implementing a restrictive monetary policy that prevents the growth of the monetary base.

In addition, a dynamic system of floating bands began to be applied. for him


dollar
in order to give greater predictability to the system. After a month of testing, the North American currency is close to the lower band. The day before yesterday, the retail dollar closed at $ 36.38 and the wholesaler at $ 35.45 at just 15 cents. The IMF has estimated that the decision to sell dollars below the range and sterilize or not these pesos would be exclusively to the BCRA, according to its opinion on the appreciation of the dollar, the need to reduce inflation and demand for existing pesos in the market.

As noted in its panorama, the multilateral credit agency acknowledged that there were risks related to external shocks (American or Indonesian), but also to the possible change of political cycle in Argentina.

"We have clearly seen good results in the new monetary policy framework," said Roberto Cardarelli, head of the IMF's technical mission, arrived at a meeting with reporters in a Recoleta hotel. "There is a appreciation of the peso, which is more or less in line with the new program's objective, and this is a more restrictive monetary policy than the one previously followed by the Central Bank. inflationary expectations in the last poll.In the center, and the tax issue was approved in the House of Representatives and we await the approval of the Senate, it will then be necessary to achieve the objectives set by the budget. "

" The New Monetary Policy Framework Employs to Stabilize the Value of Money It is now time to continue to implement it and wait for a stronger reduction in inflation expectations. in the coming weeks and months, "said the Italian economist, who stated that he did not see many" controversial "issues to be addressed during his visit to the country. "We are very comfortable with the latest developments in terms of stability," concluded the fund specialist.

Asked about the possibility of intervening in the market by buying dollars and issuing pesos, Cardarelli explained that it had been decided to start with the zero growth of the monetary base did not know to how much the idea was restrictive. "It is necessary to have an idea of ​​the demand for money, which is very difficult to estimate in all countries in general, and perhaps even more so in Argentina," he said.

"If monetary policy becomes too restrictive, can see a very sharp appreciation of the exchange rate, where the authorities have the opportunity to buy and inject pesos into the economy to ease monetary policy, if the exchange rate depreciates a lot, this indicates that monetary policy is too lax Authorities can make it more restrictive by selling dollars and reducing the amount of pesos in the economy, "explained Mr. Cardarelli. "There are two-way safeguard clauses, it's a decision that the Central Bank has to take, depending on whether monetary policy is the most appropriate to achieve its objectives, which is basically what its President said yesterday: reduce inflation, "he said. And he concluded, "That's what he said and we agree that it's a very important goal."

"We are worried," Cardarelli said when the latest figures for economic activity were mentioned. "Current monetary and fiscal policies are a policy of stabilization, and this stabilization has a cost, we expect this cost will be short, the recession will not last long, it will be two or three quarters," he said. predicted.

"In the second quarter of next year, we will witness a recovery in economic activity, with an increase in the sector and a reduction in the interest rate, as inflation continues to decline and there will be an effect of confidence on the side of domestic demand, "he noted. And then he added, "We think the recovery will start in the second quarter, the average annual growth will be negative because the end of this year will be negative," he said. He pointed out that the worst time of the recession would be the fourth quarter of this year, while the economy would have a floor at the first of 2019 and a takeoff in the second. The differences between the IMF's and the government's outlook for the 2019 GDP (-0.5% and -1.7%), he said, are more related to the different view than to the fact that they are not the same. they have the real impact of monetary policy. more restrictive by the end of 2018 and postponement for next year. "There is not much difference with timing," concluded the Italian economist.