Ar­gentina’s Bud­get Pre­dicts 3.5% Eco­nomic Growth Next Year


BUENOS AIRES (Dis­patches) - Ar­gentina’s govern­ment pre­sented its 2018 bud­get to Congress on Fri­day, fore­cast­ing eco­nomic growth of 3.5% and an­nual in­fla­tion of 15.7% next year.

The bud­get also ex­pects Ar­gentina’s cur­rency to de­pre­ci­ate to an av­er­age of 19.3 pe­sos to the U.S. dol­lar while in­vest­ment would rise 12%. This year, the ex­change rate is on track to av­er­age 16.7 pe­sos, and in­vest­ment is ex­pected to in­crease 10% from 2016.

Pres­i­dent Mauri­cio Macri’s govern­ment ex­pects the pri­mary fis­cal deficit to de­cline to 3.2% of eco­nomic out­put, down nearly one per­cent­age point from this year.

“The econ­omy is al­ready run­ning on all cylin­ders, and the same thing will hap­pen in 2018,” the Trea­sury Min­istry said in a state­ment.

The bud­get, which could be mod­i­fied in Congress, aims to mod­ern­ize an out­dated na­tional in­fra­struc­ture sys­tem and ad­dress so­cioe­co­nomic prob­lems, in­clud­ing the num­ber of peo­ple liv­ing in poverty, which rose steadily be­tween 2011 and 2016. The bud­get’s fore­casts re­flect an im­prove­ment over 2016, when the econ­omy shrank 2.3% in 2016 and in­fla­tion surged to al­most 40% dur­ing parts of that year.

Sep­a­rately, the govern­ment aims to sub­mit another bill to sim­plify the fed­eral tax code. The Trea­sury Min­istry is de­vel­op­ing a plan to re­duce some taxes, in­clud­ing a pos­si­ble grad­ual re­duc­tion in the coun­try’s 21% value-added tax, ac­cord­ing to two govern­ment of­fi­cials fa­mil­iar with the plan.

The 2018 bud­get would re­duce govern­ment sub­si­dies by 16% next year and in­crease spend­ing on so­cial pro­grams by 22% from 2017. As a per­cent­age gross do­mes­tic prod­uct, eco­nomic sub­si­dies would fall to 1.4% from 2% this year.

Apart from the macroe­co­nomic fore­casts typ­i­cally in­cluded in the bud­get, this year’s pro­posal in­cludes a cri­tique of al­legedly widespread cor­rup­tion dur­ing the ad­min­is­tra­tion of for­mer Pres­i­dent Cristina Kirch­ner. Ac­cord­ing to the bill, cor­rup­tion in in­fra­struc­ture projects was so per­va­sive dur­ing the pre­vi­ous govern­ment that it would be equiv­a­lent to 0.4% of Ar­gentina’s to­tal eco­nomic out­put this year.

“Cor­rup­tion and the lack of trans­parency in public spend­ing led to the enor­mous over­pay­ment of public-works projects over the last decade,” the bill said. “A com­par­i­son of av­er­age costs for each kilo­me­ter of road built be­tween 2012 and 2015 shows that in 2016 the govern­ment spent 700,000 U.S. dol­lars less per kilo­me­ter for new roads than it did pre­vi­ously.”

That al­leged over­spend­ing on roads cost the govern­ment $2 bil­lion, ac­cord­ing to the bill.

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