MercoPress. South Atlantic News Agency

Argentina forecasted to expand for fifth year running

The Argentine economy is forecasted to expand over 8% in 2006 for the fourth year running and with a comfortable carry on effect of 3% into 2007, reported Argentina's Central Bank, which originally was estimating a 7% growth.

Until last August the Argentine economy was expanding at an annualized 8.6%, which means the GDP has expanded over 40% since the meltdown of the economy in 2001.

The country's federal budget was estimated on a very conservative annual growth of 4%, half of what private analysts were anticipating.

"The economy's growth tendency remains high, with no change of tendency observed", pointed out the Central Bank in its report with inflation estimates for the fourth quarter of the current year.

"The GDP expansion will generate a statistical push of above three percentage points which anticipates a solid expansion in 2007, for the fifth year running", adds the report.

Pointing out that Argentina is expanding at "Chinese rates", supported by the construction industry, manufacturing and the financial sector, inflation and other social indicators also are evidence of the excellent performance of the Argentine economy.

Following on annual retail prices which in September reached 7.1%, the Central Bank estimates that by the end of 2006, prices will be in the range of 8 and 11%, and therefore below the 12.3% of 2005.

Unemployment is forecasted to drop to 9% in 2006, the first time in over a decade the index is one digit which compares favorably with the 10.1% of 2005 and 10.6% of the second quarter.

"The significant increase in employment, focused in the formal sector is helping the unemployment rate to drop, in spite of the growing incorporation of people to the labor market", adds the report.

The bank forecasts that the sustained increase in private consumption and job creation which are pushing the economy will continue until the end of 2006.

This year should also signal a record in foreign trade with exports reaching 44.5 billion US dollars, compared to 40.6 billion last year, leaving a surplus of 10.5 billion US dollars, slightly below last year's.

In 2005 Argentina re-structured its huge foreign public debt of over 100 billion US dollars with a 75% acceptance from private creditors, considered one of the largest capital cuts in modern financial history. Defaulted sovereign bonds were exchanged for new bonds under different conditions but with a considerable reduction in their face value.