MercoPress. South Atlantic News Agency

Argentine economy expands 3%, thus saving 3.5bn in payments to bonds tied to GDP

Minister Kicillof made the announcement on Thursday frustrating expectations

Argentina's National Institute of Statistics and Census, Indec, announced that the country's GDP grew by 3% across the last calendar year, dropping short of the figure necessary to service bonds linked to the nation's economic activity.

 Economy minister Axel Kicillof said that on the fourth quarter of 2013 the Argentine economy expanded 3%, thus saving Argentina 3.5bn dollars.

The value of the titles have dropped up to 13% in value, while the government on Thursday hinted that the growth rate would be recalculated in September of the current year. The Argentine budget was estimated on an annual growth of 5.1%.

Over the past weeks, markets speculated that Indec would release figures showing a GDP growth higher than 3.2%, the lowest level necessary for payment under current agreements. Enthusiasm waned during the day, however, as the official announcement approached, and before the data was revealed bonds plummeted by as much as 11%.

The change in methodology applied by the current index was one of the conditions imposed by the International Monetary Fund, who had criticized the Argentine government for not adopting measures previously to tackle suspect inflation and growth data.

The IMF nevertheless will have to analyze the changes made in this latest system of calculating growth in an attempt to increase transparency.

Market analysts in Buenos Aires said that the Argentine government is under double pressure: reporting a higher than expected growth rate thus generating greater payments to bond holders, and frustrating markets by under reporting.