The IMF said Tuesday that Argentina's recovery from recession has been weaker than expected and needs to make further progress in fiscal consolidation and structural reform to reach sustainable growth.
After seeing gross domestic product fall 3.1 percent last year, Argentina should register 1.7 percent growth in 2000, according to the IMF's projections.
Inflation, as measured by consumer prices, is expected at 0.4 percent this year, after a 1.8 percent decline in 1999.
Argentina's unemployment rate is forecast at 15.0 percent in 2000, up from 14.2 percent last year. The overall public sector balance is expected to show a deficit of 2.8 percent of GDP, down from a 4.1 percent deficit in 1999.
The International Monetary Fund said that while Argentina has made progress in fiscal consolidation under measures enacted in late 1999, the country still needs to "bolster market confidence in the fiscal outlook."
Firm adherence to last year's measures should reduce the debt-to-GDP ratio, increase market confidence, and ease Argentina's financing conditions, the IMF said, setting the basis for a sustained recovery.
The IMF urged Argentine authorities to base next year's revenue assumptions on "achievable" growth projections.
Argentina has had a 7.13 billion dollar stand-by credit arrangement with the IMF since March, to support its fiscal consolidation and structural reform efforts.
While the central government has made progress in fiscal consolidation, the IMF pointed to continuing concerns with Argentina's provincial governments, and urged federal authorities to "utilize all the means at their disposal" to restrain new borrowing by the provinces.
The IMF praised Argentina's progress on structural reform, including measures approved in May to introduce more flexibility into the labor market.
"The reform is expected to have a significant positive impact on competitiveness and employment over time," the IMF said.
The IMF also praised the restructuring of the country's health system for retired workers, starting next year.
The Argentine banking system, meanwhile, has weathered the recession well, the IMF said, and continues to be sound.
"Bank lending remains sluggish," however, as both banks and borrowers remain cautious in their attitude for future prospects, the IMF said.
The IMF executive directors concluded that with the structural reforms under way, and public sector deficits on a declining path, the Argentine economy is "in a good underlying position to resume sustainable growth"-- WASHINGTON (AFP)
© 2000 Al Bawaba (www.albawaba.com)
