TD Bank economists say that Argentina’s move to impose capital controls in an effort to stem a run on the country’s banking system risks making the situation worse in that country, and that there are no obvious answers to the crisis.

“This drastic action will curtail the pace of capital outflows, it will not reverse the tide. Argentina remains in the grips of a deep economic recession, which is frustrating its ability to manage its heavy external debt,” says TD in a new report. “And, while this latest move may buy the government some time, it risks exacerbating the country’s grave economic problems.”

The Argentine government undertook this action in the hopes of alleviating pressure on bank deposits and international reserves. Year-to-date, Argentine bank deposits have declined by 17%, and international reserves have fallen by nearly 40%.

“But, if the Argentine government has won itself a temporary reprieve, it is far from out of the woods. In the first place, there is the question of effectiveness. The controls will curb capital outflows, but they will not halt them entirely — if one hole in the dike has been plugged, the water will surely flow out some other way. Then, there are the economic repercussions. Capital controls are likely to undermine consumer confidence even further. This will dampen consumer spending, at a time when the economy is already entering a fourth successive year of recession. Capital controls may also undermine international investor sentiment, curtailing foreign investment into Argentina.”

Argentina is trapped in a downward fiscal spiral, TD says. “Tax revenues are falling, forcing the government to cut spending in order to keep the budget in balance. This is deepening the economic contraction, further drying up government revenues. There is no clear exit from this morass. And, that means Argentina is destined to remain in the spotlight, at least through the turn of another year.”