Monday Market Musings>>> Will Argentina’s New Economic Minister be Able to Save the Economy?
Picture Credit: Freepik website
Sworn in by President Alberto Fernandez as the third Economic minister within a month, Sergio Massa outlined his strategy to turn the crisis around by vowing to stop printing money that helps fuel the rising inflation, declaring that “we have to confront inflation with determination.” Argentina has one of the world’s highest inflation rates, a 60% annually at the moment, with the expectance for it to reach 90% by the end of the year. The country’s people have been experiencing high inflation as if on a cycle for approximately a century now, and although the economy recovered last year after crumpling under the weight of the pandemic, the rebound seems to be temporary. Analysts expect the economic growth to slow later on in the year and worsen next year. Foreign exchange is also not looking good, since Dollars have become rare to the point where companies find it almost impossible to import necessary inputs needed to function properly. Its all a chain effect.
Massa has a daunting challenge ahead of him, and Argentina is running out of replacements as Massa’s predecessors resigned within such a short time span. Martin Guzman, abruptly resigned on the 2nd of July, and his replacement Silvina Batakis spent less than a month on the job before resigning as well. Although, economic analysts suggests that Massa appears to be committed to reach his goals of reducing spending and reaching a fiscal deficit of 2.5% of Gross Domestic Product which was around 4.5% just last year.
Picture Credit: Financial Times website
Some of the measures Massa stated were;
A new loan program with loan interest rates for first-time exporters
Taking legal action against exporters within Argentina and in the U.S for under-invoicing or over-invoicing imports.
Providing one-time payments to retired individuals along with “income recovery” for private sector workers on low-wage.
Mentions of a rearrangement of social welfare plans, to encourage recipients to re-enter the job market.
New export “regimens” for some sectors, agriculture, mining, tech and fossil fuels inclusive.
Requesting congress to pass legislation intended to provide tax relief to several industrial sectors.
Massa will also be leading the country’s relationship with the IMF, along with all other lenders. The goal of reaching a fiscal deficit of 2.5% of Gross Domestic Product, which was included in part of the commitment that the country had made with the IMF, a key supporting factor of its $44 billion program.
August 8th 2022 | 3:30 PM