Narayan AmmachchiUS ratings agency Moody’s says the Argentine economy is firmly on the road to recovery, estimating it to grow by 3% in 2017 and 3.5% in 2018.
“While Argentina’s economic growth has been volatile, it is also larger and wealthier than peers,” said Gabriel Torres, a Moody’s senior credit officer, in a note to investors.
As of now, the economy is in good shape and showing all signs of potential growth. Moody’s expects the government initiatives, slated to be launched after the October mid-term elections, to reduce the fiscal deficit by at least 1% of GDP in 2018.
“Faster growth should support a reduction in the fiscal deficit, which will top 6% of GDP this year. The government’s debt-to-GDP ratio will rise to 53% this year and 56% next,” the agency noted.
However, Moody’s has expressed concern at high inflation and the country’s large foreign currency debt, warning that the increasing share of the country’s debt in the hands of private investors might leave its fiscal system vulnerable to volatility.
While half of Argentina’s government debt is held by public sector entities, the proportion of debt held by the private sector is rising. The high share of foreign-currency debt, says the agency, may expose the government balance sheet to exchange rate risks.
Earlier in March this year, Moody’s raised its outlook on Argentina’s credit rating to “positive” from “stable”, expressing confidence in President Mauricio Macri’s initiatives to reverse the country’s economic fortunes.
That change reflected the rating agency’s view that the Argentine economy will start to report positive growth, in part after new policies that reduce the deficit take effect.
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