Buenos Aires: Argentina's economy should expand by 4.5 per cent to 7.5 per cent next year, the central bank said on Thursday, warning that Europe's financial mess poses the biggest threat to growth.
According to its freshly approved monetary programme, the bank said the policies that have helped Argentina's economy boom over the last nine years will remain largely in place.
"The biggest source of uncertainty is associated with the sovereign debt crisis and financial system risk presented by the advanced economies," the programme says.
Italy, the Eurozone's third-largest economy, remains at the centre of the debt crisis that began in Greece two years ago.
Italian Prime Minister Mario Monti pledged new efforts to boost the economy after a disappointing bond auction on Thursday underlined the country's shaky public finances.
Investors meanwhile fret that Argentine President Cristina Fernandez's unorthodox and hard-to-predict policies will leave the country vulnerable to fallout from Europe's debt woes and to slower demand from key commodities client China next year.
Argentina has roared back from the dark days of its 2001-02 sovereign debt default and shock currency devaluation. Fernandez credits her policies, and those of her late husband, Nestor Kirchner, who preceded her in office, for the rapid expansion.
But Wall Street takes a dim view of her reliance on state intervention in the economy, and Argentina has remained locked out of the international capital markets.
The country's economy grew 8.1 per cent in October from a year earlier, beating market expectations but marking the slowest pace of growth in a year.
Inflation for full-year 2012 is seen at 9.2 per cent, according to the document issued by the central bank.
Private economists say that Argentina has under-reported consumer price increases over the last five years for political gain as well as to save on inflation-linked bond payments. They say the country's inflation rate is actually more than twice the rate reported by the government.
Strategy
"These figures show that the monetary stance will remain extraordinarily lax, with the central bank continuing to accommodate inflation at a very high level," Alberto Ramos, who analyses the country for Goldman Sachs, said in reference to the central bank's projections.
"This strategy is likely to lead to further erosion of the current account and add pressure on the Argentine peso to depreciate," he said.
The central bank targeted broad M2 money supply growth at an average of 26.4 per cent for 2012, compared with the target for growth of 27.9 per cent for 2011.
Argentina's trade surplus more than doubled in November from a year ago and the central bank projects a positive balance of $8.9 billion in full-year 2012.
- 9.2%: expected inflation rate for next year
- 26.4%: M2 money supply growth expected next year
- $8.9b: trade surplus expected next year
