MercoPress. South Atlantic News Agency

Argentine economy picks up speed: 10%.

The Argentine economy during the first quarter of this year grew 10% compared to the same period in 2003, and is forecasted to reach an annual expansion of 8%, well above the IMF estimate of 5,5% and the government's 6,9%.

Argentine Ministry of Finance sources added that this year's first quarter growth was 2% above the previous period, the last quarter of 2003, and expressed optimism about over shooting the 6,9% target on which the latest debt rescheduling offer to private (defaulted) sovereign bondholders was based.

"We're confident in achieving the 6,9% growth target for 2004, which could be even higher if the country can overcome the energy shortage of the second quarter", said the Finance ministry sources.

However, "we still have to wait and see how the energy crisis affected the rest of the economy. Industrial production dropped in April but again picked up in May".

The 10% expansion is "unsustainable on a yearly basis", and "winter still hasn't arrived", which could cause "new bottlenecks", cautioned the Finance Ministry sources.

The main concern now has moved to inflation which recorded 0,9% and 0,7% in the last two months, totalling 2,7% in the first five months, which threatens the 6% for the whole year, particularly if public utility rates, salaries and the basic food basket keep increasing.

But some private analysts are not so optimistic given the growing political dispute between the central and provincial governments over distribution of federal funds, the energy shortage, and international impacts such as higher interest rates; drop in agriculture commodities prices particularly soybeans and the situation in Brazil, Argentina's main trading partner.

"The first quarter was extremely good and it's possible that growth in the second and third quarters reaches 0.5% and 0.8% in the last quarter. But we must also remember that after so many quarters of strong growth since last April the Argentine economy is undergoing a deceleration process to which we must add the energy crisis and an end to idle capacity", indicated Fundación Capital which is more inclined to forecast an annual expansion of just over 7%.

For 2005, analysts stand by their original growth estimate of 5%.