Economic Affairs

Argentina: Economic Affairs

In 2009, according to estimates by the World Bank, Argentina’s gross national income (GNI), measured at average 2007–09 prices, was US $304,722m., equivalent to $7,570 per head (or $14,120 on an international purchasing-power parity basis). During 2000–09, it was estimated, Argentina’s population increased at an average rate of 1.0% per year, while gross domestic product (GDP) per head increased, in real terms, by an average of 2.8% per year. According to official estimates, overall GDP increased, in real terms, at an average annual rate of 3.8% in 2000–09; real GDP increased by 6.8% in 2008, but real growth was just 0.9% in 2009.

Agriculture (including forestry and fishing) contributed 7.5% of GDP in 2009. The sector engaged 7.3% of the total labour force in 2011, according to FAO estimates. The principal cash crops are wheat, maize, sugar cane and soybeans. Beef production is also important. During 2000–09, according to official estimates, agricultural GDP increased at an average annual rate of 0.7%; the GDP of the sector increased by 9.8% in 2007, but declined by 2.5% in 2008 and by 15.7% in 2009, owing to a severe drought, considered the worst in 100 years.

Industry (including mining, manufacturing, construction and power) engaged 23.7% of the employed labour force in 2006 and contributed an estimated 31.8% of GDP in 2009. During 2000–09, according to official estimates, industrial GDP increased, in real terms, at an average annual rate of 3.9%; sectoral GDP increased by 4.0% in 2008, but declined by 1.2% in 2009.

Mining contributed an estimated 3.6% of GDP in 2009, and engaged 0.4% of the employed labour force in 2006. Although Argentina used to possess substantial deposits of petroleum and natural gas, as well as steam coal and lignite, few hydrocarbon deposits have been discovered since the mid-1990s. According to official estimates, the GDP of the mining sector increased, in real terms, at an average rate of 0.7% per year during 2000–09; the sector’s GDP decreased by 1.1% in 2009.

Manufacturing contributed an estimated 21.2% of GDP in 2009, and employed 14.0% of the working population in 2006. During 2000–09, according to official estimates, manufacturing GDP increased, in real terms, at an average annual rate of 3.8%; manufacturing GDP increased by 4.5% in 2008, but decreased by 0.5% in 2009.

The construction sector contributed 5.7% of GDP in 2009, and engaged 8.8% of the employed labour force in 2006. During 2000–09, according to official estimates, the GDP of the sector increased at an average annual rate of 5.3%; construction GDP increased by 3.7% in 2008, but decreased by 3.8% in 2009.

Energy is derived principally from thermal power (largely fuelled by natural gas), responsible for the production of 63.2% of net national production in 2007. Hydroelectricity accounted for 29.9% of Argentina’s total energy production in 2007, while the country’s two nuclear power stations produced 6.9%. In 2009 imports of mineral fuels comprised an estimated 6.3% of the country’s total imports.

Services engaged 75.2% of the employed labour force in 2006 and accounted for an estimated 60.7% of GDP in 2009. According to official estimates, the combined GDP of the service sectors increased, in real terms, at an average rate of 3.6% per year during 2000–09; sectoral GDP increased by 3.2% in 2009.

In 2009 Argentina recorded a visible trade surplus of US $18,528m., and there was a surplus of $11,290m. on the current account of the balance of payments. In 2009, according to provisional figures, the principal source of imports was Brazil (30.5%), followed by the USA, the People's Republic of China and Germany. Brazil was also the principal recipient of exports, accounting for 20.4% of total exports in that year, followed by Chile, the People's Republic of China and the USA. The principal exports in 2009, according to provisional figures, were mineral fuels and lubricants (10.2% of the total value) followed by vehicles. The principal imports were heavy machinery and mechanical appliances (15.7% of the total value) and vehicles.

In 2009 a consolidated central government budgetary surplus of 5,083m. new pesos was recorded. Argentina's general government gross debt was 675,603m. new pesos in 2009, equivalent to 59.0% of GDP. Argentina’s total external debt in 2008 was US $128,285m., of which $66,410m. was public and publicly guaranteed debt. The cost of debt-servicing in that year was equivalent to 10.7% of the value of exports of goods, services and income. The annual rate of inflation averaged 9.4% in 2000–09; consumer prices increased by 6.3% in 2009. According to preliminary labour force survey figures, the national unemployment rate was 8.3% in the first quarter of 2010.

The country recovered well from its major default on sovereign debt to the IMF in 2002. In spite of what was effectively the largest default in the Fund’s history, the IMF extended a new, three-year deal to the Argentine Government. By early 2005 some 76.6% of Argentina’s privately held debt (estimated at some $82,000m.) had been converted into several new types of bond, facilitating Argentina’s readmission to international financial markets. In an effort to liberate economic policy from IMF regulation, the Government repaid outstanding loans of some $9,500m. to the Fund in 2007. None the less, fears of a second default on its sovereign debt in late 2008 led to significant outflows of domestically and internationally held capital, while the exchange rate declined sharply as investors converted their peso holdings into dollars. The Government of Cristina Fernández de Kirchner announced a series of measures intended to alleviate the impact of economic downturn, including a major programme of public works, various tax incentives, the extension of full employment status to workers in the informal sector, and a plan to improve access to credit. The risk of default receded in 2009 following the rise in the price of soybeans, one of Argentina's principal commodities. A strong performance by the agricultural sector, most notably a record harvest of soybeans (prices for which continued to rise), in addition to increasing consumption and investment, as well as growing demand from Brazil and China, Argentina’s principal trading partners, resulted in rapid economic growth in 2010, following minimal expansion in 2009. In June 2010 the Government also announced that it had successfully restructured 66% of the $18,300m. of outstanding defaulted debt that Argentina owed to creditors. However, rising inflationary pressures were of concern, while critics argued that levels of government expenditure were unsustainable, with public spending by presidential decree expected to increase further in advance of elections in 2011. Indeed, following the Congreso’s failure to approve the 2011 budget, in December 2010 President Fernández authorized the use of the 2010 budget in 2011, with modifications including the transfer of additional central bank reserves to a fund for servicing debt payments to private creditors (the establishment of which had provoked considerable controversy in early 2010).

Citation: Economic Affairs (Argentina), in Europa World online. London, Routledge. Retrieved 04 February 2012 from http://www.europaworld.com/pub/entry/ar.is.57