MercoPress. South Atlantic News Agency

Argentina growing at an annual 9%

Economic activity in Argentina expanded 8,8% last August over the same month in 2003, and 8,6% during the first eight months of the current year according to a release from the Argentina National Statistics and Census Office, INDEC.

August growth was 0,9% over last July, and the first semester of 2004 the Argentine economy expanded at an annualized 9% compared to the same period in 2003.

Argentina's GDP last year expanded 8,8% the first inter-annual positive performance since 1998 when the several years long recession started.

The Argentine 2004 budget was based on an expansion estimate of 4%, but the federal government now believes growth will be above 7% and the Central Bank in the range of 8%. The 2005 budget has also being estimated on a 4% GDP growth.

Regarding inflation Central Bank president Martin Redrado addressing the Argentine Senate Budget and Finance Committee said it could be estimated in 6,5% for 2004, and between 5 and 8% in 2005.

"In 2005 underlying inflation will range 5% and the adjustment of relative prices will add 1 or 2%", indicated Mr. Redrado who forecasted that in 2006, retail prices index should vary between 4 and 7%.

As to the exchange rate Mr. Redrado forecasted a stable US dollar in Argentine money markets, "a floating system which is flexible and managed with no major problems and where the Central Bank has no dominating position".

Mr. Redrado said that incoming foreign investment capital and exports comfortably support the current policy.

"International reserves in the first nine months of 2004 have increased 2,5 billion US dollars and ninety banking institutions are performing above Central Bank requirements", highlighted Mr. Redrado adding that "we are looking at an incipient financial market in pesos, which is most encouraging".

However he admitted that government banks have difficulties loaning their surplus and deposits continue to be "mostly short term".