By: Shane Romig
BUENOS AIRES (Dow Jones)--Argentina's gross domestic product is seen growing well over initial expectations this year, increasing by 7%, economy minister Amado Boudou told Dow Jones Newswires Wednesday on the sidelines of a conference with local businessmen.
In the 2010 budget, growth had been estimated at just 2.5%, but expectations have risen sharply after the strong economic rebound seen in recent months.
The government is often accused of underestimating growth in the budget, as it then has more scope to spend the extra revenue associated with higher tax collections.
Tax revenue in July totaled ARS37.4 billion ($9.5 billion), up a steep 38.4% on the year. That followed a nearly 40% year-on-year rise in June on the year and an all-time tax revenue record of ARS39.3 billion in May.
According to the government, the Argentine economy grew 6.8% in the first quarter of the year, and economists have been revising their estimates higher. Many now believe growth could be in the 7%-to-8% range this year.
The Royal Bank of Canada on Wednesday raised its forecast to 6.5% from 5% due to "strong growth in Argentina's top-trading partners, high commodity prices, and election-related spending." Solid forex inflows will also help increase central bank reserves and improve or sustain bond prices, RBC said.
However, the impressive GDP and tax revenue figures are also due in a large part to inflation, which the government estimates to be around a 10% annual rate. Private economists estimate an actual inflation of about twice the official rate and accuse the government of manipulating inflation data. The government regularly denies such allegations.
Boudou also said Wednesday that the government is in no hurry to sell new bonds overseas. The country's sound fiscal shape means there is no pressing need and the country will sell new debt when conditions are ideal, he said.
Argentina is looking to sell about $1 billion in bonds overseas for the first time since it's 2001 default, but is biding its time until interest rates drop further.
Meanwhile, there has been speculation lately that the government may be preparing to lower the export taxes on some farm goods. When asked about the speculation, Boudou did not deny it, saying that "we'll announce something when we have it ready."
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