BUENOS AIRES (Dow Jones)–A draft version of Argentina’s 2012 budget forecasts economic growth of about 5% next year while estimating annual inflation of about 9%, a person familiar with the budget said Thursday.
Argentine President Cristina Kirchner will formally submit the budget to Congress later Thursday and changes could be made to key budget details before then.
The 5% growth estimate would mean a sharp slowdown for the economy, which last year expanded by about 9%, according to the statistics agency, Indec. The inflation rate would be only slightly changed from Indec’s current estimate of under 10%.
The executive branch has been working without a budget since 2010 because Congress declined to pass Kirchner’s 2011 budget.
The 2012 draft indicates that government spending will increase by no more than 20%, almost half of what it has risen this year, according to the person, who spoke on condition of anonymity given the budget hasn’t been formally presented.
Federal spending has soared this year ahead of October’s presidential election. Critics say this has fueled inflation, which easily surpasses 20% annually, according to private-sector estimates.
In recent years, Argentina’s budgets have significantly underestimated economic growth, inflation and government spending. Economy Ministry officials attributed the estimates to prudence. But critics say underestimating the numbers gives the government greater leeway in spending unexpected revenue, freeing it from congressional oversight.
This year, critics may be less inclined to question the budget given widespread concern about the global economy and financial problems in Europe. A possible recession in the U.S. has also raised fears of a global slowdown that could reduce growth in emerging markets such as Argentina.
Still, top government officials and even many critics expect the government to have little trouble meeting its financing needs next year. Most analysts expects expect the government to use central bank reserves and funding from federal entities such as the pension agency, Anses, to make debt payments.
The budget estimates that total debt payments will amount to about 8% of gross domestic product in 2012.
«More than half of that is owed to local public sector institutions, which are estimated to have the resources necessary to refinance those payments,» according to budget documents reviewed by Dow Jones Newswires.
As in 2011, the budget presumes that the main debt payments will be those related to GDP-linked «warrants,» to be paid in December, and the amortization of Boden 2012 bonds in August.
«Financial management in 2012 will continue to be focused on transactions that, while improving the debt profile, help positively position Argentine credit in national and international markets,» according to the documents. «In this sense, we foresee the execution of debt management transactions that diminish the weight of short-term payments.»
The government aims to improve yield curves by «buying back» some bonds whose prices are very low.
According to the documents, the government also plans to improve relations with «financial institutions and governments, as is the case with the People’s Republic of China.»
Economy Ministry Amado Boudou is expected to head to Congress next week to discuss the budget and its forecasts.
Source: online.wsj.com/