MercoPress. South Atlantic News Agency

Consumption and investment, Argentina's soft belly

Argentina is forecasted to expand for the third consecutive year in the range of 9% with the GDP reaching over 300 billion US dollars, which represents a 5,3% above the highest ever of 1998 before the recession began.

A report from the Buenos Aires consulting company EGES (Economic and Social Performance Group) indicates that "with the current level of production, Argentina is set to begin "a new chapter" particularly given the latest figures which indicate that economic activity in September 2005 expanded 9% over the same month a year ago and 1% over last August.

Furthermore expansion in the third quarter was 8,9%, compared to 8,8% in the two previous quarters.

Manufacturing so far this year has expanded 7,3%, which means that with this performance "the overall annual growth will reach 7% above the 1998 numbers". Similarly with construction which is heading for an all time record 12% expansion.

However EGES points out that that two components of global demand have not managed to recover the pre 2001/02 levels: domestic consumption and investment.

"Consumption between 1998 and 2002 dropped 20%. Since the accumulated growth of 2003/2004 and currently, consumption has increased almost 25% but is still below the pre-crisis numbers", indicates EGES report.

Regarding gross fixed domestic investment, the collapse between 1998 and 2002 was 55% but has since recovered 100%.

However, "the great challenge ahead it to increase consumption and investment levels to such a degree as to ensure long term expansion".

EGES suggests that more "refined" public policies are needed to ensure growth, "as well as maintaining the repayment capacity to our local and foreign creditors" through employment and diminishing the current income gaps between regions and citizens.

"The big question is not so much about the performance of the economy but rather about the administration's available capacities to push ahead with this new chapter in Argentine economic history", concludes the report.

Argentina forecasts record exports

Argentina's exports increased 17% in the first 10 months of 2005 compared to the same period last year, totalling 34,7 billion US dollars up from 33,3 billion in 2004, according to official data released in Buenos Aires.

Manufactured goods experienced the greatest boost totalling 9,7 billion in the first ten months of 2005, which represents a 29% increase over the same period a year ago.

Main markets for Argentina's exports were Brazil, Chile, United States, China and Spain, but there was an "important increase" in purchases from Russia and Germany. Among the main goods exported figure automobiles, soybeans, beef, sunflower oil, chemicals and various sorts of fuel.

Argentine exports are forecasted to reach a record 40 billion US dollars in 2005.