BUENOS AIRES: Argentina's government expects the economy to regain some momentum next year after slowing sharply in 2012 but the days of China-like growth rates appear to be over.
Latin America's No. 3 economy should expand 3.4 percent this year and 4.4 percent in 2013, levels that will trigger payments on the country's growth-linked debt, the 2013 budget bill showed on Thursday.
"In the global context of a recession in developed parts of the world, Argentina continues growing, but of course at lower rates than last year," Economy Minister Hernan Lorenzino said as he presented the bill to Congress, adding that both investment and consumption growth should rise next year.
Annual economic growth hit 8.9 percent in 2011 and topped 8 percent in seven of the last nine years, rivaling China's swift expansion as the Argentine economy rebounded from a severe crisis in 2001-02.
The economy has cooled quickly this year due to sluggish global growth, high inflation, reduced grains output and sinking business confidence that private sector analysts link to mounting government controls.
Lorenzino said investment growth was seen speeding up to 7.4 percent in 2013 from 1.3 percent in 2012, while consumption growth was expected to rise to 4.3 percent next year versus 3.8 percent this year. He did not explain why, however.
Creditors were eagerly awaiting the 2013 budget estimates to see if growth would be strong enough to trigger payouts to holders of billions of dollars in Argentina's GDP warrants.
A roughly $4 billion payment would come due in December 2013 if the economy grew above the 3.26 percent threshold in 2012, as the budget bill indicates. The payment threshold for 2013 is 3.22 percent growth.
FOREIGN RESERVES
In part to cover that hefty sum, the center-left government said in its budget it will use up to $7.97 billion in central bank reserves to repay debts to private creditors, marking a 40 percent increase from the figure seen in the 2012 budget.
Argentina currently has about $45 billion in foreign reserves, thanks in part to the central bank's dollar purchases on the tightly controlled foreign exchange market.
Analysts at Citigroup and several local debt traders were skeptical whether the government would pay the warrants next year.
"Even though the budget assumes warrant payments, we believe the administration will opt for using those resources otherwise, especially in an election year," Citigroup said in a research note, referring to mid-term elections scheduled for October 2013.
Argentina has been accused of exaggerating economic growth for political gain while grossly under reporting inflation. The International Monetary Fund demanded this week that the country improve its economic data by mid-December.
Because of these doubts, some analysts believe the government could at the last minute report economic growth below the 3.26 percent warrant payment threshold.
GDP warrant prices moved little on Thursday, and one trader said the likelihood of a payout next year had already been priced in. The warrants are trading up more than 40 percent since June 1 .
CONTROLS TO CONTINUE
The 2013 budget bill, which was posted on the congressional website, estimated the trade surplus at $12.2 billion this year and $13.3 billion next year.
The trade surplus is a crucial source of foreign currency for Argentina, which has been virtually frozen out of debt markets since a 2002 default. Government-imposed import curbs have reduced purchases abroad since February and sparked disputes at the World Trade Organization.
Lorenzino said the trade surplus would also benefit next year from an expected record grains harvest and improved economic conditions in key trading partners Brazil and China.
Argentina's official exchange rate is forecast at 4.53 pesos per dollar in 2012 and 5.10 pesos per dollar next year. Although the budget bill did not specify, this figure is presumed to be an average over the course of the year.
The peso is currently trading at a bid price of 4.68 pesos per dollar, although a virtual ban on foreign currency buys and other government controls have spawned multiple exchange rates that are distorting the economy.
Deputy Economy Minister Axel Kicillof, a close presidential aide and architect of the controversial state takeover of energy company YPF, told Reuters that the administration of foreign trade and the exchange rate would continue in 2013.
The budget bill foresees 10.7 percent consumer inflation this year and 10.8 percent in 2013. Private inflation estimates hover closer to 25 percent a year and price rises are seen remaining high despite the economic slowdown.
Argentina foresees a primary budget surplus of 0.53 percent of gross domestic product this year, which should rise to 2.32 percent of GDP in 2013, the budget bill showed. The primary surplus represents government savings before debts are paid.
The overall fiscal balance is expected to show a deficit of 1.65 percent of GDP in 2012 and a minimal surplus of 0.04 percent of GDP next year.
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