January 16, 2021

The Government of Macri assumes that Argentina will be in recession "for a time"

The Government of Macri assumes that Argentina will be in recession "for a time"



Argentine Economy Minister Nicolás Dujovne acknowledged today that the national economy will be in recession "for a time" but considered that "the important thing" is that the country has "a storm pilot", President Mauricio Macri, whose policy has managed to "avoid a crisis".

"We know that we have hard months ahead, but we also know that without these measures they would have been much harder, that we have managed to avoid a crisis," the minister said on Radio La Red.

According to Dujovne, the country is going through a recession "that is hard and difficult" but he considered that this is "keeping the rules of the game".

"The Argentine economy is in recession, it's going to be in recession for a while, the important thing is that we have a storm pilot, the president, who has really courageously decided to move forward in the measures that were needed to stabilize the situation," he asserted.

In his opinion, that solution is to "accelerate the road to fiscal balance", which is why the Executive sent Congress a draft budget law for next year with primary fiscal balance.

"And now we add a very restrictive monetary policy, for many months, in such a way to stabilize the currency, which had been hit hard in recent months," he said.

Dujovne reiterated that Argentina has had in 2018 a set of events such as the drought -which strongly affected agricultural production- and the international volatility "that led to the outflow of funds from emerging countries", something that the southern country "hit very hard" "for not having" finished correcting the economic "imbalances.

He also underscored the fact that the "notebook crisis" affected investors' confidence, in reference to the corruption caused by big businessmen and officials of the Kirchner government (2003-2015).

The economic 'storm' that Macri reiterates that the country is suffering left in the second half of this year a year-on-year drop of 4.2% in gross domestic product, a decline that cut a positive streak of almost a year and that forecasts coincide that it will not be reversed in the short term.

At the end of April, with the beginning of the devaluation of the peso against the dollar and the euro, the government decided to request financial assistance from the International Monetary Fund (IMF) to accelerate the reforms in order to put an end to the deficit.

While initially the credit amounted to 50,000 million dollars for the next 3 years, last week, the result of new negotiations with the agency after the worsening of the fall of the currency, the Executive managed to accelerate the collections and increase that figure in 7,100 million more.

Consulted in case of not having signed the agreement, the country ran the risk of falling into a new cessation of payments of debt, the minister was blunt.

"No, we were at risk of having to make a tighter fiscal adjustment than what we are doing, what was happening to Argentina is that the funds to finance our program were scarce. What we have decided is to issue less debt, accelerating the process of convergence to fiscal balance, "he said.

"Argentina would never have gone into default under this management, what we would have done is make a much harder adjustment and the truth is that we have avoided it thanks to the support of the world," he remarked.

Once this "crisis" is over, he continued, we will have a "much healthier" economy, we will resume growth and we will have an economy that once again generates "a lot of employment" and reduces poverty in a "more lasting" way.

"Today we have to focus on piloting this storm, get out of it and we will emerge strengthened," he said.

Dujovne, who asked for patience while insisting that the government reinforce social aid, also referred to the changes in monetary policy announced by the new president of the Central Bank, Guido Sandleris.

These were launched yesterday and work with a system of bands by which a floating exchange rate will be maintained only if the dollar costs below 34 pesos or above 44.

"Today, Argentina has one of the most competitive inflation-adjusted exchange rates of the last 10/12 years, the peso is at a very low value, on the other hand, along with that, we are implementing a very tough monetary policy, very healthy, which has to tend to strengthen the currency, "he concluded.

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