ARGENTINA ECONOMIC AND FINANCIAL REVIEW, SEPTEMBER 14-17,

UNCLAS BUENOS AIRES 001047 SIPDIS SENSITIVE E.O. 12958: N/A TAGS: EFIN ECON EINV ETRD ELAB EAIR AR SUBJECT: ARGENTINA ECONOMIC AND FINANCIAL REVIEW, SEPTEMBER 14-17, 2009 ¶1. (U) Provided below is Embassy Buenos Aires' Economic and Financial Review covering the period September 14-17, 2009. The unclassified email version of this report includes tables and charts tracking Argentine economic developments. Contact Econ OMS Megan Walton at WaltonM@state.gov to be included on the email distribution list. This document is sensitive but unclassified. It should not be disseminated outside of USG channels or in any public forum without the written concurrence of the originator. It should not be posted on the internet. -------------- GOA SUBMITS THE 2010 BUDGET TO CONGRESS -------------- ¶2. (SBU) On September 15, the GoA formally submitted the 2010 Budget bill to Congress for approval. Minister of Economy Amado Boudou appeared in the Chamber of Deputies to defend the Budget Bill on September 17. According to press reports, the budget's main macroeconomic projections include 2.5% GDP growth, a 7% average inflation rate, a primary fiscal surplus of 2.7% of GDP (about ARP 27 billion or $6.8 billion),and an average exchange rate range of 3.95 ARP/USD. Total revenues are projected at ARP 273.7 billion (about 22% of GDP) and total expenditures at ARP 273.1 billion (mostly transfers to social security),which results in a financial surplus (after interest payments) of ARP 621 million. The bill also revised down 2009 GDP growth from the original 4% (included in the 2008 bill) to 0.5%, compared to private analyst forecasts of a 3-4% GDP contraction for this year. The projection for 2010 is for growth of 2.5%. Some private analysts, having predicted that the Government would claim 2009 GDP growth of about 2%, have acknowledged that the budget projections appear less unrealistic than in recent years, but note that they still overstate growth and understate inflation and the exchange rate. In a radio interview on September 16, Minister Boudou said that the projections included in the 2010 Budget bill are "in line with what happened this year, and with the more favorable outlook for next year." He also highlighted that given that 2010 debt obligations are low, the country will continue reducing its debt, and noted that the bill includes improvements in the areas of health and education. Post will follow up with more details after receiving an official copy of the budget. -------------- -------------- INDEC SURPRISES WITH HIGHER THAN EXPECTED CPI HEADLINE -------------- -------------- ¶3. (SBU) National statistics agency INDEC announced September 11 that the August CPI increased 0.8% m-o-m, higher than higher than the 0.5-0.7% m-o-m most private analysts expected it to announce, but still below their own forecasts of 1.0-1.5% m-o-m inflation. Inflationary pressures in August were quite widespread. Out of the nine CP I subgroups, only one had inflation below 0.3% m-o-m, while three subgroups had readings above 1.0% m-o-m, including: food and beverages (1.2% m-o-m),clothing (1.1%) and medical and health care expenditures (1.9% m-o-m). According to INDEC, the accumulated CPI increase for the first eight months of the year was 4.2%, compared to private estimates of about 10-15%. According to some analysts, the slightly more accurate than expected inflation announcement may indicate that the GoA is becoming more sensitive to the lack of credibility of INDEC's published statistics and is seeking to gradually improve the accuracy of its reporting. According to INDEC, wholesale prices (WPI) increased 0.9% m-o-m in August, and a total of 5.6% in the first eight months of 2009. -------------- --- CONSUMER CONFIDENCE INDEX DECREASES IN SEPTEMBER -------------- --- ¶6. (SBU) Di Tella University's consumer confidence index slid for the second consecutive month in September, decreasing 1.6% m-o-m to 40.02 points. In spite of this drop, the index has so far increased 8% for the first eight months of the year. Overall, the index decreased 9.9% y-o-y and is well below its January 2007 historic peak of 60.9 points. In September, two out of three index components declined. Consumer sentiment towards the macroeconomic environment decreased 1.9%. Consumer perception of personal economic well-being decreased 2.8%. However, consumer willingness to purchase durable goods and real estate increased 0.6%. (Note: The index is based on surveys of individuals and consumers' willingness to purchase durable goods, houses and cars in the first two weeks of September.) MARTINEZ