Argentina Warned of Economic Weaknesses

Ratings agency Moody’s warned Argentina about the “structural weakness” in its economy. It also warned that the government’s measures to face the “financial turbulence” in the past two weeks would be effective but would drag gross domestic product growth down in 2018. In a report, Moody’s said that “high inflation, a heavy reliance on investor flows and a small domestic financial and credit market” had exposed Argentina’s “significant structural weaknesses”, Xinhua reported. Gabriel Torres, Moody’s Vice President and Senior Credit Officer for Argentina, wrote that “the peso’s weakening is credit negative in light of Argentina’s very high reliance on portfolio flows to fund both its fiscal and its external current account deficits.” Torres said that the government’s response has included “sharp increases in interest rates, a reduction in 2018 public investment and the opening of discussions with the IMF for a flexible credit line.” However, while he accepted that these “proactive actions seek to deter financial turbulence from affecting the real economy,” he predicted they would lead to lower economic growth this year.