Argentina’s market volatility can spark off a currency crisis again, say analysts. The country that was hit by recession is preparing for the presidential elections at the end of the year.
The pro-market President Mauricio Macri’s popularity has seen a downfall in the recent months because of austerity measures, rampant inflation, and rising poverty that has been threatening to spoil the President’s re-election campaign.
On Monday, Argentine peso was at $43.68 which recovered a little after it fell to a record low on Friday at $43.97. This year, so far peso has been the currency that has performed the worst in the world.
The regional director at the EIU, Fiona Mackie, said that as compared to any other country, in Argentina people are very sensitive of any shift in the peso. Mackie said that the people take the currency as a guiding factor of the economy. Politically this becomes very important, she said. Mackie also added that there won’t be any overshooting of the currency the way it occurred last year in August. She also added that any moment there can be a risk of renewed volatility. Market is concerned for the third largest economy of Latin America whose interest rate is 66% and inflation is over 50%. The growth indicators for the country are weak. The economy of the country fell to 6% lower in the last three months of 2018. According to the last month’s official data the poverty rate of the country rose to 332%. The senior economist of Oxford Economics said that the central bank and the government have been worried about the crisis of currency before the elections.
Macri is pushing for the measures of austerity to meet the obligations under the financing agreement of IMF $56.3bn standby that the country had secured last year.