Argentina is currently experiencing its worst economic crisis in two decades, and the Peronist regime is set to announce new emergency government measures on Monday in an attempt to stave off further damage. The country is experiencing a huge government deficit, and its annual inflation rate reached 109% in April as a result of money printing. The government is keen to avoid a devaluation of the currency and is therefore introducing measures such as raising interest rates by 600 basis points to 97%.
The measures also include the central bank’s increased intervention in the foreign exchange market to slow the depreciation of the peso. Economy Minister Sergio Massa is aiming to persuade the IMF to expedite agreed loans and use the renminbi in foreign trade during the IMF’s scheduled visit to China on May 29. Argentina activated a currency swap with China last month, allowing just over $1 billion of this month’s imports to be paid in yuan.
The government is also set to reduce interest rates on a state-owned scheme and allow zero-tariff food imports to curb inflation. However, rising interest rates have made it increasingly expensive for Argentina to service its domestic debt, and there are concerns about the government’s constant intervention in the economy.
Many forecasters expect Argentina to enter a recession this year, and Oxford Economics predicts a fall of 1.6% in GDP, the worst outlook amongst Latin America’s major economies. Massa is seen as one of the few remaining options for the Peronist movement to run for president in October’s election, but his economic plans must succeed for him to have a chance. The opposition is also divided, with two candidates seen as potential contenders. The far-right candidate has campaigned for the dollarization of the economy, whilst Massa is initiating measures to prevent the devaluation of the peso.