March 2, 2018 / 9:53 PM / a year ago

Economists hike Argentina 2018 inflation forecasts, slash growth

BUENOS AIRES, March 2 (Reuters) - Economists revised expectations for inflation in Argentina upward while slashing growth forecasts in a monthly central bank poll released on Friday, highlighting the challenges President Mauricio Macri has faced in normalizing the economy.

The poll of 54 participants found median 2018 inflation expectations of 19.9 percent, up from 19.4 percent last month and above the government target of 15 percent. In the prior poll, expectations had jumped from 17.4 percent after the government loosened its inflation targets in late December.

That move, followed by two rate cuts in January, fueled concerns about central bank independence and the government’s commitment to fighting inflation at the potential expense of growth. The central bank held its policy rate steady at 27.25 percent in each of its two February decisions.

Macri has said fighting inflation is a priority as his government seeks to attract private investment and boost growth after more than a decade of populist rule. But his administration’s utilities subsidy cuts, crucial to efforts to lower the fiscal deficit, have contributed to price hikes.

The economists’ lowered their median growth forecast for 2018 to 2.7 percent from 3 percent previously, far below the government’s projection for 3.5 percent growth. An official warned this week that a prolonged drought in Argentina’s grains belt could harm economic activity this year.

That would nonetheless mark the first time Argentina has grown for two consecutive years since 2010-11. The economy expanded 2.8 percent in 2017, preliminary data showed this week, following a 2.2 percent contraction in 2016. (Reporting by Luc Cohen; editing by Jonathan Oatis)

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