Economy & Business - July 2003

The economy is showing the first signs of recovery following last year's calamities and the three preceding years of recession. Most forecasters still expect the economy to shrink again this year, by about 2%, thanks to a 9% fall in domestic demand and a cut in government spending. 

Exports should pick up in the second half and industry should benefit from more import substitution and easier credit. 

The official forecast is that inflation will fall to 12% this year, the peso will devalue by 8%, and unemployment will hold at 17.5%. 

The IMF's main preoccupation, the fiscal deficit, will be 2% of GDP, while public sector debt will be worth 107% of GDP by the end of the year. 

The revival in exports should mean that the country will manage a current account surplus of 4% of GDP due to a 9% rise in exports and a 9% fall in imports. This should mean that the country will be able to make its debt payments when they fall due. 

Another encouraging piece of news is the pick-up in bank deposits. These now stand at US$1.4bn, having rising by US$255m in the first fortnight of July.

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