Argentina: Has Fernández Worn out Her Welcome?
The negative effects of the left-leaning government’s unorthodox economic policies are becoming increasingly apparent, and President Cristina Fernández’s approval rating is falling in step with the deceleration of real GDP growth. A poll conducted by Management & Fit in late August put the president’s approval rating at just 35.4%, compared to 64% in a similar poll conducted shortly after Fernández’s landslide re-election victory in October 2011.
The president’s loss of popularity has negative implications for the outcome of next year’s mid-term congressional elections, where a loss of seats for her Front for Victory (FPV) faction of the Justicialist (Perónist) Party (PJ) and its allies would all but rule out any chance that Fernández’s supporters might be able to alter the constitution so as to permit her to stand for a third consecutive term in 2015.
The proximate cause of the decline is the sharp slowdown of the economy. Real GDP growth averaged 9% in 2010–2011, but the pace of expansion decelerated to 5.2% (year-on-year) in the first quarter of 2012, and ground to a halt in the second quarter, with official figures putting year-on-year growth at zero in the April-June period. Both imports and fixed investment recorded double-digit year-on-year contractions in the second quarter, while exports shrank by 9.5% compared to the same period in 2011.
A contraction of the overall economy was avoided thanks to growth in household spending of 4.2% (year-on-year), and a 6.8% year-on-year increase in public consumption. The growth rate in both of those categories slowed compared to the first quarter, and a combination of new taxes, higher gas prices, and restrictions on private access to foreign currency all figure to have a negative impact on private consumption over the second half of the year.
The official estimate of monthly economic activity (EMAE) index, a proxy for economic growth, rose by 2.7% (year-on-year) in July, well above the consensus projection of 0.8%. The government has touted the figure as evidence that the economy is poised for a rebound, citing the beneficial impact of rising prices for soybeans, among other factors. The 2013 budget unveiled in September forecasts that the economy will grow by 3.4% this year, a target that assumes year-on-year real growth of 4.2% over the second half of the year. Given the numerous challenges posed by both external factors and the government’s heterodox policies, the annual growth rate is more likely to fall in the 2%–2.5% range this year.
Fernández has emphasized external factors, including weaker Brazilian demand, when discussing the reasons for the slowdown, but the Argentine population is increasingly inclined to see the economic difficulties as an outgrowth of the government’s controversial actions. In the aforementioned Management & Fit poll, fully 44.5% of respondents cited the Fernández administration’s policies as the main cause of economic stagnation, compared to just 8% who attributed the sharp slowdown to external factors.
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