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Brazil & Southern Cone - August 2018 (ISSN 1741-4431)

Economic Highlights

IMF downgrades Argentina growth forecast: On 23 July the International Monetary Fund (IMF) revised down its growth projections for Argentina in 2018 from the 2% forecast in April to just 0.4%, with the economy predicted to contract in the second and third quarters of 2018. The IMF attributed the downturn after a “solid start to the year” partly to the drought afflicting large areas of the country, which has reduced agricultural yields, but principally to the depreciation of the Argentine peso in May and June which led to increased inflation and decreased investor confidence. Nonetheless, the IMF expects a gradual recovery in 2019 and 2020 supported by increased investor confidence due to the IMF stabilisation programme and a lower cost of capital, decreased inflation, and strong demand for Argentina’s export goods. The stabilisation programme, agreed with government led by President Mauricio Macri in June, will grant Argentina a US$50bn IMF credit line, the largest in the fund’s history, and is conditional on government commitments such as cutting spending. 

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