(Updates with context, additional figures from budget document)
By Eliana Raszewski
BUENOS AIRES, Sept 11 (Reuters) - Argentina’s inflation rate is expected at 53% in December 2019, but will fall back to 34% the following year, according to projections in the forthcoming 2020 budget, treasury officials said on Wednesday.
The budget also predicts Argentina’s economy, Latin America’s third largest, will contract by an average of 2.6% in 2019, but will return to growth of 1% in 2020.
The treasury officials, who shared the figures but asked not to be identified, said the budget would be sent to Congress on Sept. 16. The much anticipated fiscal plans will figure prominently into Argentina’s efforts to stem an economic crisis that has plunged a third of its citizens into poverty and ratcheted up inflation.
Tight monetary policy had helped tame inflation in the months before the Aug. 11 primary election. But the peso crashed along with the country’s bonds after Peronist Alberto Fernandez trounced market-friendly president Mauricio Macri, sending consumer prices spiraling again.
The shock result spooked investors, who worry especially about Fernandez’s running-mate, ex-President Cristina Fernandez de Kirchner, recalling the interventionist policies she imposed during her two terms between 2007 and 2015.
The peso lost a quarter of its value against the dollar in August and the central bank burned up reserves to stem the decline. Macri ultimately imposed currency controls, and the peso has steadied over the last week.
The 2020 budget predicts the average exchange rate will weaken to 67 pesos per dollar in 2020, from 48 pesos to the dollar in 2019, the treasury officials said.
The current account deficit is expected to hit 0.9% of GDP in 2019, then revert to a surplus of 0.4% of GDP in 2020.
The budget also forecast a trade surplus of $16.1 bln in 2019, increasing slightly to $17.5 bln in 2020, the officials said. (Reporting by Eliana Raszewski; Writing by Dave Sherwood; Editing by Kim Coghill and Sandra Maler)