MercoPress. South Atlantic News Agency

Argentine economy forecasted to keep expanding.

The Argentine economy is forecasted to expand 5% in 2005 in a favourable international context, which could be even stronger if the pending defaulted debt negotiations with private creditors prove “successful”.

The current level of activity supported by an adequate macroeconomic context, both at domestic and international level, and the inertia of the recovery process, "ensure a growth floor of 5% in 2005", according to Ecolatina, an economic assessment and advisory group.

"This scenario is based in the culmination of the debt renegotiation process during the first half of 2005", adding that the "expansion rhythm can easily advance from the basic scenario floor, if the bonds exchange is successful".

However even in the more conservative assessments, "in 2005 the Argentine economy is set to break the historical maximum of 1998", which is when supposedly the recession that exploded in the political, financial, social crisis officially began.

Ecolatina states that in spite of some expectation uncertainties during the first half of 2004, the Argentine economy this year will end with an 8,4% annual expansion..

"This confirms the 2003 rhythm when the economy expanded 8,8%, but in 2004 with a growth process which extends to all sectors of the economy".

But the report also points out that for sustainable growth, it's urgent to advance in medium and long term policies.

Among other initiatives Ecolatina proposes a "progressive" fiscal policy which is faithful to the budget primary surplus target and a monetary policy that "acts as a lubricant" for growth but with out disregarding inflation and a stable, real exchange rate to support exports.

The report also points out the need of "new credit instruments" which will help companies have access to medium and long term financing and the government's responsibility in ensuring basic infrastructure investments.

Finally Ecolatina mentions the need to finalize the renegotiation of contracts with the public utilities companies establishing "clear rules of the game and foreseeable horizons" for investments and developing human resources.

There's a brief mention to the redesigning of Mercosur to correct the multiple asymmetries within the block.