Argentina

This report does not constitute a rating action. Overview Institutional and economic profile Flexibility and performance profile A long history of macroeconomic instability and sharp changes in economic policies underpin the low credibility and predictability of Argentina's governing institutions.The recently approved IMF program reflects pragmatic negotiation by all parties to aims to avoid arrears amid a moderate reduction in the fiscal deficit and limits economic and financial deterioration in the run up to the 2023 elections.Amid ongoing economic imbalances and policy uncertainties around the electoral cycle, we expect growth to remain low, averaging a bit above 2% through 2024 in a context of high inflation. Fiscal vulnerabilities include high funding needs vis-à-vis the size of the local peso debt market

...Continued access to funding from the IMF and other official creditors is key to supporting Argentina's economy, as well as timely debt service over the coming year. Pronounced macroeconomic imbalances (including high/rising inflation, foreign exchange controls, and a low level of international reserves), a moderate pace of planned fiscal consolidation, and volatile global economic conditions underscore challenges in securing new deficit financing and smooth rollovers in the small peso-debt market. Policy execution in line with the Extended Fund Facility (EFF) targets in the run up to the 2023 elections is key to underpin local investor appetite and access to IMF disbursements, given meaningful policy uncertainties, including after the election, an objective that becomes more challenging as inflationary expectations continue to increase. These vulnerabilities around timely local and external commercial debt service are consistent with a '###+' rating....

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