MercoPress. South Atlantic News Agency

Argentine economy picks up strongly, forecasted to expand 7% in 2010

Minister Boudou attributes growth to the success of Argentine policies

Argentina's GDP will reach 7% this year based on a strong domestic demand, Economy Minister Amado Boudou said on Wednesday. The announcement follows earlier in the week reports that the Consumer Confidence index ICC has increased 2.9% in July over a year ago.

“Our goal is to reach a 7% increase in 2010,” Boudou assured and said that the government will continue with its economic policy based in the maintenance “of the added demand and the strengthening of the domestic consumption.”

The volume is above the 2.5% GDP expansion expected in the budget and 3.5% expected by the International Monetary Fund, but closer to the 6.8% forecasted by the Economic Commission for Latin America (CEPAL).

Boudou added that the economic growth is not boosted by the improvement of the global situation after the 2009 economic crisis, but by the current economic plan.

“It's not true that Argentina is growing due to the head wind, that's one of the biggest lies of 2010. The country's economy grows because of the new economic system we've applied,” the minister assured.

Argentina's economy climbed 12.4% in May compared to the same month last year, and ended the first five months of the year with an 8.6% increase year-on-year, official sources said.

The ICC improved 2.9% in July and 3.4% over June although there are increasing concerns about electricity, gas, and pre-paid medicine rates.

The Argentine Depositor Confidence Index improved 0.6% year-on and, along with the consumer index, it determined an annual rise of 2.5% for families' confidence level (ICF).

The data was published by a monthly study carried out by the Market Foundation, which uses a survey undergone in the cities of Bahía Blanca, Buenos Aires, Córdoba, Mendoza, Neuquén, Rosario, Tucumán, and in the Greater Buenos Aires area.

The report indicated that the improvement is mainly due to the betterment of the current situation for the average of families.

Although depositor confidence increased from June to July, the percentage of families that are able to save fell once again, in this case, from 13.9 to 13.7%. In this way, the tendency to spend on durable goods instead of saving the excess of income is being consolidated, which strengthens consumer pulse.

As to prospects, July bolstered the first six-month tendency regarding the consumption/savings position of families.

The net result over consumption is positive due to two fundamental motives: in the first place, the perception of the current situation, marked by the inflation/wage increase equation that has been positive for an important part of the population. In second place, the preference for consumption of durable goods has been consolidating, which tones the demand for durable goods.

In the next few months, the relationship between dollars/income/prices will be crucial for the continuation of this tendency, according to the reports.

Further evidence of the strong domestic demand was offered by President Cristina Fernández de Kirchner who announced that tax collection grew 38.4% in July compared to the same month of last year totalling 34 billion pesos (27 billion pesos).