MercoPress. South Atlantic News Agency

Argentina economy forecasted to grow 5,5%.

Argentina's economy is expected to expand between 5 and 5,5% this year according to the latest report from the country's Economy Minister Roberto Lavagna who is one of the few top officials to accompany President Nestor Kirchner this Wednesday in his two days visit to the United States. The previous forecast was 4,5 to 5%.

"We've modified GDP growth estimates for this year taking it to 5,5% since all indicators, physical production, number of jobs, hours worked and confidence level unanimously point upwards", indicated Mr. Lavagna.

"What was previously a ceiling is now the floor", said the enthusiastic minister who was responding this way to Sunday Buenos Aires press reports regarding taxes and the budget.

"The President is concerned with the publication of news that doesn't respond to what is really happening", said Mr. Lavagna who insisted that industry and the overall economy will "continue to grow".

Last Sunday Buenos Aires newspapers published that government expenditure must drop or revenue increase (taxes) if the 2004 budget surplus target of 2,5% of GDP was to be reached and that growth rate for the coming year would stabilize in 4,5%, down from 4,9% in 2003. The press also indicated that the 2004 budget was being drafted on the assumption of an annual inflation of 10% and a 4% revaluation of the Argentine currency. Another contentious issue, the elimination of taxes on exports and bank current accounts, as demanded by the IMF, was rejected by Mr. Lavagna.

The Argentine minister stressed that the first six months of 2003 ended with a budget surplus of 4,930 billion pesos, well above the 4,5 billion pesos agreed with the IMF and is spite of having given extraordinary financial assistance to Santa Fe province that suffered disastrous floods during last May and June.

However other members of the cabinet admitted the government was working to avoid the economy slowing into a "plateau". Interior Minister Aníbal Fernández in a radio interview said "we're trying to avoid a plateau since the economy is growing strongly and for this we must emphasize on short term expectations".

Regarding President Kirchner's recent visit to Europe Mr. Lavagna who will be meeting with IMF and US Treasury officials this Wednesday in Washington, admitted that French businessmen were "a bit disenchanted" with the Argentine president who did not meet with them while his one day stay in Paris.

In Spain President Kirchner also caused strong reactions from businessmen when he inferred that some Spanish companies in Argentina had profited far above "risk capital" level. Spain has investments totalling 45 billion Euros in Argentina.

Public utility companies belonging to European investors are demanding that the new Argentine government authorize rates that have been frozen since last year, to increase an average 65% to compensate for the December 2001 devaluation of the currency.