Argentine voters may have reason to worry about new president Javier Mayle’s pledge of painful economic shock therapy but markets are eager for the liberal to give a “big kick” to the economy.
According to” Reuters”, the foreign economist confirmed plans for strict spending cuts to address the country’s worst economic crisis in two decades and reduce inflation to almost 150 percent, although he warned that the situation will get worse before it gets better.
“There is no money,” he repeatedly said in his first speech, vowing to make difficult decisions even if it means pain for the country. “The challenge before us is gigantic.”
Analysts explained that Miley, who won the support of voters with a “hacksaw” economic plan to reduce government spending and eliminate large deficits, needs to follow this tough talk. His election victory has boosted stocks and bonds in recent weeks.
“The biggest danger in the coming days is that the signals are not strong enough, the signals should include a strong financial impulse and a clear indication of the desire to implement structural reforms,”ecogo Consulting said in a note.
Economy minister Miley and Luis Caputo are expected to announce a package of economic measures as early as this week, as investors look ahead to the devaluation of the peso, now controlled by currency controls, public spending cuts and possible privatization.
“It will be important for the new administration to quickly revive confidence,” economist Gustavo Beer said, adding that the government needs social and legislative support in view of possible future economic pain and even higher inflation.
Consulting firm GMA Capital Research said: “the macroeconomic picture… She is, to say the least, terrifying. And although inflation has already reached the highest levels of the last thirty years, everything indicates that the worst is yet to come,”he said.
