IMF Executive Board Concludes Article IV Consultation with Argentina

IMF News, November 10, 2016

Source details

Canonical URL

IMF Executive Board Concludes Article IV Consultation with Argentina

Other formats

• Markdown version
• Structured JSON version
• Bundle manifest

Bibliographic details

• Published: November 10, 2016

Overview and Context

• Date: November 10, 2016 (Article IV conclusion noted on November 9, 2016)
• Main judgment: Argentinean government achieved important progress in a transition toward a better economic policy after pervasive macroeconomic imbalances, microeconomic distortions, and a weakened institutional framework.
• Key policy moves implemented in 2016:
  • Peso is market determined and exchange controls have been essentially eliminated.
  • Utility tariffs increased to bring prices more in line with underlying costs.
  • Settlement with creditors enabled return to international capital markets for private and public sectors.
  • Medium-term fiscal and inflation targets announced alongside a transition toward a modern system of inflation targeting.
  • National statistics agency is being rebuilt to publish improved and credible statistics.

Economic Outlook and Projections

• Near-term impact: Reversal of previous imbalances had an adverse near-term impact; recession began before the new administration took office.
• Growth projections:
  • Economy expected to rebound from a -1.8 percent recession in 2016 to a 2.7 percent growth in 2017.
  • Growth expected to be "at a close to 3 percent pace over the medium term."
• Drivers and headwinds:
  • Planned fiscal rebalancing represents a modest headwind.
  • Offsetting factors: pickup in private consumption (as inflation falls), improving external environment, rebound of private investment.
  • Outlook characterized by greater than normal uncertainty.

Policy Priorities and Recommendations (Executive Board Assessment)

• Fiscal policy
  • Continue lowering the fiscal deficit; maintain sensitivity to impacts on growth, jobs, and the most vulnerable while keeping clear medium‑term objectives.
  • Directors broadly viewed the authorities’ gradual reduction of the fiscal deficit as appropriate; some Directors saw scope to accelerate deficit reduction if activity is stronger than expected.
  • Institutional reforms to improve fiscal framework efficiency and credibility, including:
  • Introduce a simple and transparent medium‑term fiscal policy plan.
  • Rationalize government spending, including the wage bill.
  • Remove poorly targeted and distortionary energy subsidies.
  • Restore financial sustainability to the pension system.
  • Make the tax system more progressive over time to reduce the tax burden and increase efficiency.
  • Address issues related to fiscal federalism.
• Monetary policy and inflation
  • Authorities committed to bring inflation to single digit levels by 2019.
  • Maintain price stability mandate and secure operational independence of the central bank.
  • Eliminate monetary financing of the deficit to lessen economic and social costs of disinflation.
  • Authorities maintained real interest rates broadly constant in positive territory and lowered the policy rate since Spring as forward-looking inflation indicators fell.
• Structural and supply-side reforms
  • Ambitious agenda to improve business climate and achieve strong, sustained, and equitable growth:
  • Promote competition.
  • Improve regulatory framework for energy and utilities and fully realign utility tariffs toward cost recovery.
  • Institute a transfer scheme to protect the poor during adjustment.
  • Improve infrastructure quality, lower trade barriers, and develop local capital markets.
  • Emphasize governance and anti-corruption reforms; scale back government involvement in private industries and improve governance framework.
• Social and distributional considerations
  • Pace of disinflation and fiscal consolidation should be attuned to economic costs and distributional impacts.
  • Directors encouraged authorities to reach out to stakeholders to secure broad support for reforms.

Selected Economic and Financial Indicators (key figures from IMF staff table)

• National income, prices, and labor markets (annual percent changes unless indicated)
  • GDP at constant prices: Average 2009–14 = 1.5; 2015 = 2.5; 2016 = -1.8; 2017 (Proj.) = 2.7; 2018 = 2.8; 2019 = 2.9; 2020 = 3.1; 2021 = 3.3.
  • Domestic demand: Average 2009–14 = 2.6; 2015 = 3.7; 2016 = -2.2; 2017 = 3.4; 2018 = 3.6; 2019 = 3.5.
  • Consumption (Private): 2016 = -1.7; Public: 2016 = 4.5 and 2017 = 6.6? [table presents values across categories—see full table for context].
  • Investment: Average 2009–14 = 4.2; 2015 = -3.6; 2016 = 8.2; 2017 = 7.2; 2018 = 5.9; 2019 = 5.8.
  • CPI inflation (eop, y/y percent change): 2015 = 39.4; 2016 = 20.5; 2017 = 17.5; 2018 = 13.0; 2019 = 10.3; 2020 = 9.4.
  • Unemployment rate (percent): Average 2009–14 = 7.5; 2015 = 9.2; 2016 = 8.5; 2017 = 8.3; 2018 = 6.9.
• External sector and savings-investment
  • Exports f.o.b. (goods, billions of U.S. dollars): Average 2009–14 = 71.9; 2015 = 56.8; 2016 = 55.3; 2017 = 57.2; 2018 = 59.5; 2019 = 62.0; 2020 = 65.6; 2021 = 68.9.
  • Imports f.o.b. (goods, billions of U.S. dollars): 2015 = -60.1; 2016 = -57.2; 2017 = -51.6; 2018 = -56.4; 2019 = -61.1; 2020 = -65.5; 2021 = -70.2; 2022 = -74.5 (table formatting retains negative sign convention).
  • Trade balance (goods, billions of U.S. dollars): Average 2009–14 = 11.7; 2015 = -0.4; 2016 = 0.8; 2017 = -1.5; 2018 = -3.5; 2019 = -4.5; 2020 = -5.6.
  • Total external debt (percent of GDP): 2009–14 average = 31.4; 2015 = 25.2; 2016 = 31.7; 2017 = 32.5; 2018 = 33.8; 2019 = 34.5; 2020 = 34.6.
  • Gross domestic investment (percent of GDP): 2009–14 average = 16.3; 2015 = 15.9; 2016 = 15.8; 2017 = 16.5; 2018 = 17.1; 2019 = 17.6; 2020 = 17.9; 2021 = 18.2.
  • Gross national savings (percent of GDP): 2009–14 average = 13.4; 2015 = 13.5; 2016 = 13.3; 2017 = 13.7; 2018 = 13.9; 2019 = 14.0.
  • Current account balance (percent of GDP): 2009–14 average = -2.3; 2015 = -3.2; 2016 = -3.9; 2017 = -4.2.
• Public sector (percent of GDP unless otherwise indicated)
  • Primary balance: 2009–14 average = -5.4; 2015 = -5.1; 2016 (Proj.) = -4.1; 2017 = -3.0; 2018 = -2.0.
  • Federal government primary balance: 2015 = -1.4; 2016 = -5.0; 2016 (federal gov’t primary) = -4.8? [table includes multiple federal indicators—consult full table].
  • Overall balance: 2009–14 average = -2.7; 2015 = -6.6; 2016 = -7.3; 2017 = -6.9; 2018 = -6.2; 2019 = -3.8; 2020 = -2.4; 2021 = -6.5; 2022 = -6.3; 2023 = -4.4 (table rows continue).
  • Revenues: 2009–14 average = 30.7; 2015 = 34.0; 2016 = 32.3; 2017 = 32.2; 2018 = 32.0; 2019 = 31.8.
  • Primary expenditure: 2009–14 average = 33.1; 2015 = 38.0; 2016 = 37.4; 2017 = 36.3; 2018 = 35.0; 2019 = 33.5.
  • Total public debt (federal): 2009–14 average = 43.3; 2015 = 52.1; 2016 = 51.8; 2017 = 51.1; 2018 = 51.2; 2019 = 50.0; 2020 = 48.4; 2021 = 47.5.
• Money and credit
  • Monetary base (eop, y/y percent change): 2009–14 average = 27.5; 2015 = 34.9; 2016 = 24.4; 2017 = 23.7; 2018 = 20.7; 2019 = 13.8; 2020 = 12.8.
  • Credit to the private sector (eop, y/y percent change): 2009–14 average = 28.9; 2015 = 35.6; 2016 = 26.4; 2017 = 21.2; 2018 = 18.4; 2019 = 14.8; 2020 = 15.3.
  • Credit to the private sector real (eop, y/y percent change): 2009–14 average = -9.3; 2015 = 0.6.
  • LEBAC interest rate (average) 2/: 2009–14 average = 16.0; 2015 = 28.1; 2016 = 29.8; 2017 = 20.1; 2018 = 13.1.
  • LEBAC real interest rate (average) 2/: 2009–14 average = 5.0; 2015 = 5.1.
  • LEBAC interest rate (eop) 2/: 2015 = 28.3; 2016 = 22.8; 2017 = 17.7; 2018 = 15.1; 2019 = 13.2.
• Memorandum items
  • Gross international reserves (billions of U.S. dollars): 2009–14 average = 42.0; 2015 = 25.6; 2016 = 33.3; 2017 = 36.5; 2018 = 49.2; 2019 = 56.5; 2020 = 61.2; 2021 = 66.6.
  • Exchange rate (eop, Arg$/US$): 2009–14 average = 5.3.
  • Change in REER (average, percent change): 2009–14 average = 6.7; 2015 = 26.0; 2016 = -12.8.
  • Transfers from BCRA: 0.9; 1.4; 0.2 (table lists these memorandum figures).

(Note: table entries are reproduced verbatim where provided; consult the full published table for cell-level alignment and additional rows.)

Final Board Observations

• Executive Directors strongly welcomed Argentina’s resumption of the Article IV consultation and underscored importance of continued close engagement between authorities and IMF staff.
• Directors encouraged authorities to remain steadfast in reforms and to secure broad stakeholder support to ensure sustained, equitable growth and job creation while protecting the poor during macroeconomic stabilization.

International Monetary Fund — Press Release No. PR16/500

References

• Argentina and the IMF
• IMF Policy Advice -- A Factsheet
• Press Releases
• PRESS CENTER
• https://www.imf.org/en/home