FT – Argentina: fiscal and monetary addiction


On Tuesday President Fernández announced she is seeking re-election in October for another 4-year term. The chances of Ms. Fernández winning are high, because the economy is booming: gross domestic product was 9.9 per cent higher last quarter than the year before and export earnings rose 30 per cent in 2010.  The government further stimulates the domestic economy by increasing the public expenditure in 30 per cent in the first quarter of the year. But in spite of the increased tax revenues, the government will rack up a fiscal deficit this year. Whereas Brazil tries to maintain the real down, Argentina, in spite of a similarly hot economy, supports a less expensive currency, boosting domestic purchasing power. The the trade surplus (since 2002) is expected to turn to a deficit in the second half of the year. High commodity prices mean that state stimulation is unnecessary for Argentina’s economic boom.


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