Argentina's 2008 budget bill, presented to Congress on Friday, sees annual inflation of 7.3 percent and calculates gross domestic product growth at 4 percent. Inflation is expected to average 7.7 percent over the course of 2008.
Latin America's number-three economy is in its fifth straight year of expansion at about 8 percent. In the country's 2007 budget bill, the center-left government of President Nestor Kirchner had also underestimated growth. The strategy has allowed the government to announce economic results that have exceeded the budget's stipulations.
A central bank survey carried out among analysts last month gave a median outlook for 2008 growth of 6.2 percent, with inflation for the year estimated at 10 percent. High inflation has dogged Kirchner's government. Last year's budget included estimates for inflation in a range of 7 percent to 11 percent.
Inflation has come in below market expectations since January, when the government replaced the head of the consumer price unit at INDEC, the national statistics unit, with a political ally, prompting fears of government meddling with the data.
As a result, investors have become increasingly wary of the country's inflation-indexed bonds, which account for more than 40 percent of total public debt. Inflation in the first eight months of the year stands at 5 percent, with 12-month inflation through August of 8.7 percent.
In relation to the local currency, the budget bill for next year envisages an exchange rate of 3.21 pesos per dollar. The peso closed on Friday at 3.1950/3.1975 against the dollar in informal trade as measured by Reuters.
The budget will be in force for the first year of a new government following a presidential election on October 28. First lady and senator Cristina Fernandez de Kirchner has a wide lead in opinion polls. It calculates a primary budget surplus of 3.15 percent of gross domestic product and a $10.06 billion trade surplus. Official details of the bill broadly confirmed those given by an Economy Ministry source earlier this week.