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BUENOS AIRES: Argentina's economy will edge higher this year as the new government lifts interventionist controls, fueling growth of about 4.5 percent annually between 2017 and 2019, Finance Minister Alfonso Prat-Gay said on Thursday.
The minister called the estimates a "working hypothesis". Argentina's new center-right government, which took office just December, inherited a stagnant economy with double digit inflation, falling exports and low foreign reserves.
"We expect Argentina to return to growth this year after the second half of last year was quite complicated," Prat-Gay told reporters. "We estimate between 0.5 and 1 percent this year."
Under free markets believer President Mauricio Macri, the government has moved fast to unravel a complex web of controls imposed on Latin America's third-largest economy by the previous administration, aiming to boost exports and investment.
It has floated the peso currency, ended capital restrictions, cut some export taxes and set guidelines for consolidating the large fiscal deficit, earning market praise.
Argentina's country risk has dropped to below that of Brazil on the JP Morgan Emerging Markets Bond Index Plus. Beyond tackling interventionism, the government has also sought to shore up the country's foreign reserves.
Prat-Gay said the central bank would announce a $4-6 billion loan from international investment banks in the coming days, while it still had about $2 billion available from its currency swap with China.
Furthermore, grain firms in the agricultural powerhouse had liquidated more than $4 billion of exports since the government floated the peso in December, sending it 26.5 percent lower against the dollar.
The former government had propped up the local currency with foreign reserves, causing those grain firms to hoard produce until they could get a better exchange rate.
Other sources of financing could open up if Argentina reaches a deal with creditors suing it over unpaid debt.
On Wednesday, the country said it would make a proposal to those creditors in the week of Jan. 25. Prat-Gay said Argentina would seek first to settle with bondholders suing it in New York before negotiating a deal with creditors elsewhere.
The claims stood at $20 billion overall. He added that any deal would be subject to approval in Congress, where the ruling party does not have a majority.
"The administration seems committed to resolving this issue," the Institute of International Finance wrote in a research note.
"However, the government will have to build political support to make the legal changes needed for a resolution, which could delay any agreement until the second half of 2016." Former President Cristina Fernandez, who still has a strong following, published a volley of tweets on Thursday criticizing Prat-Gay's announcements.
"They are going to indebt the country in order to pay the vultures what they want," she wrote.
Prat-Gay said the government's main preoccupation now was containing inflation, which ran at 28 percent in 2015.
Inflation spiked towards the end of last year due to fears the peso would lose more value than it ultimately did, he said.
Now was the time for a downward price correction.
Copyright Reuters, 2016