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Economic Affairs

Argentina: Economic Affairs

In 2018, according to estimates by the World Bank, Argentina’s gross national income (GNI), measured at average 2016–18 prices, was US $550,333m., equivalent to $12,370 per head (or US $19,820 per head on an international purchasing-power parity basis). During 2009–18, it was estimated, Argentina’s population increased at an average rate of 1.1% per year, while gross domestic product (GDP) per head increased, in real terms, by an average of 0.6% per year. According to official estimates, overall GDP increased, in real terms, at an average annual rate of 1.7% in 2009–18; GDP increased by 2.7% in 2017, but declined by 2.5% in 2018, according to preliminary figures.

Agriculture (including forestry and fishing) contributed a preliminary 7.2% of GDP in 2018. The sector engaged 6.8% of the total labour force in mid-2015, according to estimates by the United Nations Food and Agriculture Organization. The principal cash crops are wheat, maize, sugar cane and soybeans. Beef production is also important. During 2009–18, according to official preliminary figures, agricultural GDP increased at an average annual rate of 2.4%. The sector increased by 3.0% in 2017, but decreased by 14.3% in 2018, according to preliminary figures.

Industry (including mining, manufacturing, construction and power) contributed a preliminary 27.2% of GDP in 2018. During 2009–18, according to official preliminary figures, industrial GDP increased, in real terms, at an average annual rate of 0.4%; sectoral GDP increased by a 2.5% in 2017, but decreased by 3.1% in 2018.

Mining contributed a preliminary 4.5% of GDP in 2018. Petroleum reserves totalled 2,017m. barrels in 2018 and production stood at 591,808 barrels per day in the same year. Natural gas production was 39,425m. cu m and proven gas reserves totalled 345,684m. cu m in 2018. According to official preliminary figures, the GDP of the mining sector declined by 1.6% during 2009–18; the sector’s GDP decreased by 3.4% in 2017, but increased by 0.8% in 2018.

Manufacturing contributed a preliminary 15.0% of GDP in 2018. During 2009–18, according to official preliminary figures, manufacturing GDP increased, in real terms, at an average annual rate of 0.4%; manufacturing GDP increased by 2.6% in 2017, but decreased by 5.0% in 2018.

The construction sector contributed a preliminary 4.8% of GDP in 2018. During 2009–18, according to official preliminary figures, the GDP of the sector decreased at an average annual rate of 1.8%; construction GDP increased by 10.5% in 2017 and by 1.4% in 2018.

Energy is derived principally from thermal power (largely fuelled by natural gas), responsible for an estimated 64.5% of national production in 2017. Hydroelectricity accounted for an estimated 23.7% of Argentina’s total energy production in the same year, while the country’s three nuclear power stations produced 4.6% of energy in 2017, according to official sources. Two more nuclear reactors, built with Chinese and Russian funding, were scheduled to begin operations in the mid-2020s.In 2019 the Government announced plans to construct a natural gas pipeline from the Vaca Muerta hydrocarbon deposits. In 2018 imports of mineral fuels comprised a provisional 10.9% of the country’s total imports.

Services accounted for an estimated 65.6% of GDP in 2018. According to official preliminary figures, the GDP of the services sector increased, in real terms, at an average rate of 2.1% per year during 2009–18; sectoral GDP increased by 2.3% in 2017, but decreased by 0.6% in 2018.

In 2018 Argentina recorded a visible merchandise trade deficit of US $867m., while there was a deficit of $27,479m. on the current account of the balance of payments. In 2018, according to provisional figures, the principal source of imports was Brazil (23.8%), followed by the People’s Republic of China, the USA and Germany. Brazil was also the principal recipient of exports, accounting for 18.3% of total exports in that year, followed by China and the USA. The principal exports in 2018, according to provisional figures, were residues from the food industries and prepared animal feed, followed by cereals, vehicles, fats and oils, and mineral fuels, lubricants and related materials. The principal imports in 2018, again according to provisional figures, were vehicles, boilers, electrical machinery, and mineral fuels and lubricants.

In 2020 a consolidated general government budgetary deficit of 415,103.7m. new pesos was forecast. Argentina’s general government gross debt was 12,569,407m. new pesos in 2018, equivalent to 86.1% of GDP. Argentina’s total external debt in 2018 was US $280,516m., of which $131,182m. was public and publicly guaranteed debt. In that year, the cost of servicing long-term public and publicly guaranteed debt and repayments to the International Monetary Fund (IMF) was equivalent to 45.0% of the value of exports of goods, services and income (excluding workers’ remittances). The annual rate of inflation was 34.3% in 2018. According to labour force survey figures, the national unemployment rate was 10.6% in the second quarter of 2019.

The Government of Mauricio Macri inherited a high inflation rate, depleted reserves and an increasing fiscal deficit. Macri ended the strict capital controls in order to allow the peso to float freely against the US dollar, but this brought about a 30% devaluation of the peso, leading to further increases in consumer prices. In an attempt to reduce the fiscal deficit, energy subsidies were ended and public sector wage restraints introduced. Exchange controls were also eased and the exchange rate unified. Resolution of the long running dispute with the hold-out creditors in 2016 (see Debt ‘Default’ ), meant that Argentina was able to return to the international markets. Although inflows of foreign funds grew, inflation and unemployment remained high. Macri took advantage of his party’s increased congressional representation following the 2017 mid-term elections to gain approval for business-friendly economic reforms, most notably to the tax, labour and pension systems. The measures were intended to increase competition and investment, as well as boost employment. However, rises in US interest rates, as well as a severe drought, led to further increases in inflation in 2018, raising fears from investors and, from April, prompting a further fall in the value of the peso. This was exacerbated by further increases in fuel and utility prices, which caused widespread popular discontent. In June the Government was forced to secure a US $50,000m. stand-by agreement with the IMF. In exchange for the IMF loan, the Government agreed to accelerate its plan to eliminate the fiscal deficit by 2020; to this end, the 2019 budget contained further cuts in expenditure, including to education, healthcare, transport and public works projects. The economy contracted by 2.5% in 2018, while annual inflation rose to 34.3%. Macri’s falling popularity was reflected in the results of the primary elections of August 2019, and prompted a further dramatic fall in the value of the peso that the introduction of emergency economic measures did little to stall. The new left-wing Government, which took office in December, declined any further disbursements from the IMF and reopened negotiations on debt restructuring. President Alberto Fernández promised to reinvigorate the domestic economy, but not at the expense of Argentine people; to this end, a package of emergency measures received congressional approval at the end of the month. Although talks with the IMF were ongoing in 2020, the global coronavirus (COVID-19) pandemic, as well as falling oil prices, increased the likelihood of a further default and resulted in a bleak economic forecast for the year.

Citation: Economic Affairs (Argentina), in Europa World online. London, Routledge. Retrieved 25 May 2020 from http://www.europaworld.com/pub/entry/ar.is.57

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