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For the IMF, bond prices fell due to uncertainty "about domestic policies"

2020-10-22T17:28:20.542Z


Maintains the projection of a drop in GDP of 11.8% for Argentina, with a recovery of 4.9% in 2021Mary Church 10/22/2020 14:00 Clarín.com Economy Updated 10/22/2020 2:00 PM The International Monetary Fund stated that although bond prices "recovered at the conclusion of the renegotiation processes (of the debt swap), they recently declined, reflecting, in part, uncertainty about domestic policies ." This was mentioned by the agency in a report on Economic Outlook for Latin America and the Ca


Mary Church

10/22/2020 14:00

  • Clarín.com

  • Economy

Updated 10/22/2020 2:00 PM

The International Monetary Fund stated that although bond prices "recovered at the conclusion of the renegotiation processes (of the debt swap), they recently declined, reflecting, in part,

uncertainty about domestic policies

."

This was mentioned by the agency in a report on Economic Outlook for Latin America and the Caribbean, which was presented at a press conference by the director for the IMF's Western Hemisphere Department, Alejandro Werner.

The report describes the situation that the countries of the region went through after the impact of the coronavirus, the economic prospects are renewed - which for Argentina confirms what was released last week, of a

GDP drop in 2020 of 11.8%

and a recovery in 2021 of 4.9% - and, in a box, the debt swaps of Argentina and Ecuador are analyzed.

"Argentina and Ecuador undertook a

successful restructuring of their

sovereign

debt

in 2020, amid growing concerns about debt sustainability and financial pressures," the IMF said.

He mentions that debt restructurings provide significant

liquidity relief over the next decade

(US $ 33.3 billion for Argentina and US $ 16.4 billion for Ecuador) “and are expected to

reduce the public debt / GDP ratio to 40% in Argentina

and 45% % in Ecuador".

For Argentina, as in the World Economic Outlook (WEO, for its acronym in English), it

does not update the fiscal or inflation variables

corresponding to 2021-25 and 2020-25, respectively, “since they are largely linked to the negotiations still in progress on the program ”, it was explained.

He did make explicit what he expects for 2020 in some aspects: they foresee that public spending will be 41.6% of GDP (in 2019, without a pandemic, it was 34.3%), that the primary fiscal deficit (before the payment of interest) will be 8.5% of GDP and

gross debt climbs to 96.7% of product.

Argentina is in the middle of negotiating a new loan with the IMF to repay the previous one, for about US $ 44,000 million.

For this, at the beginning of October, the Fund's technicians, Julie Kozack (number two of the Western Hemisphere Department) and Luis Cubeddu (leader of the mission for Argentina), were in Buenos Aires, on which occasion they held meetings with Martín Guzmán, Miguel Pesce, and a good part of the economic team (in addition to businessmen from the UIA and the CGT).

Kozack and Cubeddu will return in the second week of November

to advance the negotiations.

The Government intends to send a bill to Congress to have the legislative endorsement of this new loan and Guzmán mentioned this Wednesday that the intention is to have a path of accumulation of reserves and fiscal consolidation.

Luis Cubeddu, head of the IMF mission with Julie Kozak, deputy director of the FM department for the Western Hemisphere.

In turn, last week, the managing director of the IMF, Kristalina Georgieva, described that “Argentina faces very dramatic challenges.

The country is in a deep recession, social conditions are worsening, economic imbalances are increasing, the difference between the official exchange rate and the parallel exchange rate (the blue) is expanding ”.

Although at the beginning of October he said that they were not going to ask the country to cut spending further in these circumstances.

Outlook for the region

“The pandemic, lockdowns and external forces contributed to

the historical collapse of activity

in the second quarter of 2020. The contractions in GDP experienced by the LA-5 countries (the top five) in the second quarter were the largest in history ”Describes the report of the Monetary Fund.

That is why, in the midst of the “deep recessions” throughout the region, for Latin America and the Caribbean, figures are projected for a GDP drop of 8.1% in 2020 and an improvement of 3.6% in 2021, always and when the pandemic is behind us.

"Oil prices are expected to remain moderate, while metal prices and, to a lesser extent, soybeans are projected to strengthen in the medium term," the Fund advances with the diagnosis.

Regarding the fiscal support programs that the countries of the region put into practice to counteract the effects of the pandemic, the IMF said that on average they represented 8% of GDP and that the studies carried out confirm “that these exceptional measures are being key to mitigate the effects of the pandemic ”.

“In countries where lockdowns are still a barrier to activity, policies should focus on ensuring

that companies have sufficient liquidity and protecting employment and income

, while medium-term fiscal consolidation plans are drawn up to safeguard debt sustainability ”, they describe.

Instead, "in countries that are relaxing containment measures, efforts should focus on supporting recovery, for example through structural reforms."

Once the pandemic is under control, and the recovery is on track, fiscal policy should focus on replenishing the room for maneuver, the IMF advises.

"Monetary policy should remain accommodative as long as inflation remains within the target range and inflation expectations are well anchored," he adds.

NE

Look also

According to the head of the IMF, "Argentina faces dramatic challenges and social conditions are worsening"

The IMF moderates the catastrophic forecasts for Latin America with a fall of 8.1% in 2020

Source: clarin

All business articles on 2020-10-22

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