The Central Bank of Argentina stands in Buenos Aires, Argentina. (Photographer: Sarah Pabst/Bloomberg)

Argentina to Go Deeper Into Recession, Central Bank Survey Says

(Bloomberg) -- Argentina’s economic outlook deteriorated significantly in August amid a renewed currency crisis, with economists surveyed by the central bank forecasting a deepening recession, weaker currency and higher inflation.

Economists in the monthly survey published Tuesday see South America’s second-largest economy contracting 1.9 percent in 2018, compared with the previous forecast of a 0.3 percent contraction. Inflation is expected to end the year at 40.3 percent, up from the 31.8 percent prediction in July.

The Argentine peso, the worst-performing currency in emerging markets, is forecast to finish the year at 41.90 per dollar, markedly weaker than the 30.50 seen in the July survey. The peso is down more than 52 percent so far this year.

The survey’s findings represent a stark turnaround from earlier in 2018. In January, economists predicted 3 percent growth, about 17 percent inflation and the peso to be near 22 per dollar by the end of this year. A drought, rising U.S. interest rates, emerging market selloffs, poor communication and sometimes confusing policies took down the peso and economic outlook.

The figures come after one of Argentina’s more turbulent weeks. The peso tumbled over 16 percent after President Mauricio Macri rattled markets last Wednesday with a vague statement about changing Argentina’s agreement with the International Monetary Fund. The IMF didn’t comment for much of the day and Argentine officials were mum on details all last week.

Argentine officials plan to meet with IMF leaders in Washington on Tuesday to request the Fund to speed up payments as part of the $50 billion credit line agreed upon in June. The move is an attempt to restore investor confidence in Argentina’s finances for next year. Argentina Treasury Minister Nicolas Dujovne did roll out new austerity measures on Monday to mixed reviews from analysts. Dujovne plans to meet with IMF leaders in Washington on Tuesday.

©2018 Bloomberg L.P.