Mounting Risks: Assessing The Damage

May 2008 | Economic Analysis

Recent destabilising economic and political events in Argentina have brought to light some of the distortions that have been building up since the recovery from the 2001-02 financial crisis. A favourable external climate, combined with pro-cyclical economic policies, have resulted in an impressive economic growth story, with twin surpluses providing a cushion against negative shocks. However, as we have often stated, the current policy mix is fraught with economic (and also political) risks, which have come to a boil over the past few weeks as farmers have rejected a new export tax and inflation expectations have soared. We are thus revising a number of our economic forecasts.

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