Fact Check: Argentina

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The IMF warned about “major imbalances” in the Argentine economy

La Nacion

Saturday, April 18, 2015
By Silvia Pisani | LA NACION

WASHINGTON.- For good measure, the Government and the International Monetary Fund (IMF) yesterday left in sight that they continue to have weighty differences.

This is suggested by a report in which the entity formally insisted that Argentina has “significant imbalances” in its economy, including “obviously high inflation”.

Unlike what happened in the past, so far there was no formal reply from Minister Axel Kicillof, although yesterday in a plenary of the so-called G-20, he launched a strong condemnation of any suggestion of an “adjustment” as he’d already said he was convinced that it leads only to “failure”.

It is not ruled out that, somehow, he will return today to express discomfort over that among his aides they considered a “biased view” of the economic progress of the country in which the pessimistic interpretations are accentuated to the extent that “it departs from the usual formulas” of orthodoxy.

One of the sticking points was the growth projection.

The government budget ensures an expansion of 2.8 percent this year. But the IMF forecasts a contraction of 0.3 percent, while the World Bank takes even a little further, a retraction of 0.4 percent.

It is not the first time that the Economy Ministry and the Casa Rosada have understood that there is a “biased” ideology when the body analyzes the economic course of Argentina.

Today, discussions

Today a discussion is scheduled, behind closed doors, for the strategic Financial and Economic Committee of the entity, in what is considered the decisive and final assembly point.

According to what LA NACION learned yesterday, in principle Kicillof is not scheduled to speak at that meeting.

But the presentation put down in the name of the region expresses, once again, a dose of discomfort from Argentina and differentiation over the way in which the country’s evolution is being read.

The so-called “spring session” of the body moved ahead yesterday in its program with the presentation of the semiannual diagnosis for the region, which, once again, the country was included among those with “significant imbalances”, largely encouraged by external factors. Among them, the drop recorded in the prices of raw materials.

After the formal presentation, and facing queries from reporters, the head of the department for the Western Hemisphere, Alejandro Werner, estimated that Argentina’s accounts present “significant imbalances” that show they must be addressed.

He listed in that sense the existence “of a large fiscal deficit” and along with it, “obviously high inflation” and a “significant deterioration of the energy balance.”

In this context, without going into the details of its characteristics, Werner added the particular exchange rate policy of the Government as “the reflection of an external situation, a political reaction” to the situation rather than a macroeconomic imbalance itself.

However, he declined to make any suggestion about the economic course to follow to respond to difficult diagnosis that he noted. “By having no dialogue with the authorities, a policy recommendation is hard to make,” he said.

He also laid out a difficult outlook for Brazil, a country to which he led, perhaps, what ended up being the most important regional warning.

In contrast, he especially praised the progress of Uruguay, although he recommended that it “intensify efforts” so that “their healthy performance” is not affected by the “bad times of its neighbors,” referring to the economies of Brazil and Argentina .

In general terms, in this case, without specifically naming the country, Werner said it will be the nations “without floating exchange rates and in great need of external financing” that will be most at risk “of an imminent interest rate hike in the United States. ”

View Original Article: El FMI advirtió sobre “desequilibrios importantes” en la economía argentina