IAEF predicts Argentina's economy to grow 6.5% in 2010

The Finance Executives' Institute (IAEF) reported Argentina's economy is expected to grow by 6.5 percent this year.

Imports are meanwhile forecast to increase by 43 percent in the first semester of the current year compared to the same period in 2009, according to the IAEF study.

However, the report also said that the physical volume of exports would decrease 7 percent compared to the data released in 2008, in spite of the fact that the Gross Domestic Product is predicted to be 3.5 percent higher than 2008.

Also, the report reveals that "the increase in revenue in the second quarter, which resulted in a 37.8 percent increase of "normal" resources of the public sector and a slowdown in capital spending, allowed an improvement of the corrected financial results minus extraordinary incomes in that period (- ARG$2.5 billion), both versus the first quarter (-ARG$5.1billion) as in the second quarter of 2009 (-ARG$6.7 billion)."

IAEF finance experts also wonder if the world economy will resume its long-term growth rate (3.5 percent per year according to purchasing power parity, and 2.7 percent according to GDP at market prices) or fall into a W-shape curve. To answer this, the IAEF explains that "the question confronts optimistic and pessimistic positions. The first are based on four factors: economies of scale that generate growth, the historical trend for less developed countries to converge the capita GDP of the most developed ones, the effect of globalization on trade growth and the increase of savings in the world. In turn, the pessimists emphasize the destruction of wealth that produced the crisis and the fiscal picture."

According to the IAEF, the optimistic hypothesis are possible due to the "revalued dollar against the euro and its depreciation against the yuan; the very low nominal and real interest rates; a trade growth higher than global GDP; and the commodity prices in levels above those early in the decade. In this scenario and assuming favorable domestic conditions and prudent macroeconomic policies, Argentina could grow in both 2010 and 2011."