MercoPress. South Atlantic News Agency

Argentina’s recovery will lag other regional countries, forecasts Roubini

Essential for Argentina to re-establish normal links with the IMF and the Paris Club

Argentina's economy will lag other countries in the region, expanding between 2% and 2.5% next year and recovery will be “much slower” in the post 2008 crisis than in previous years when the country got used to rates of 6% to 7%, said economist Nouriel Roubini.

Speaking in a teleconference with Buenos Aires, invited by Argentina’s Construction Chamber Roubini said Latinamerica's third largest economy still faces challenges as it weathers the global crisis eight years after its sharp 2001/02 economic meltdown and strongly suggested it should work to normalize relations with creditors such as the Paris Club.

Argentina should also “resolve its confrontation with the International Monetary Fund and accept an economic review by the IMF” he added. Argentina is working to reach a deal with investors who rejected a 2005 restructuring of defaulted debt to clear the way to issue new bonds

Professor Roubini said Argentina’s recovery would be slower because or the tight controls on capital flows and the need for a more rational fiscal and monetary policies.

“Although economic growth needs a strong fiscal showing, its conditions should be sufficiently under control as to recover the confidence of domestic and foreign investors”, said Roubini. He called for an “efficient control” of capital flows so as to avoid asset bubbles which could lead to spiralling inflation, “already too high”.

To achieve sustained growth, Argentina must increase investments in infrastructure and also taxes, so it can begin lowering the budget stimuli fed out through monetary policy and fiscal aid to several sectors.

Another issue is increasing domestic demand for export produce, granting the economy greater autonomy from the swings of the global economy.

Finally he insisted in greater transparency for the financial system and restabilising links with international multilateral credit organizations, “which will be essential in helping combat inflation and asset bubbles”.

Overall investors should be cautious taking into account that “we are just coming out of global recession, but its effects will be long lasting in the world economy both medium and long term, he concluded.