Argentina flag Argentina: Economic and Political Overview

The economic context of Argentina

Economic Indicators

Argentina has a long history of political and economic instability - with significant growth fluctuations every year. After growing 5% in 2022, the country entered a recession in 2023, with GDP contracting an estimated 2.5% amid shrinking household consumption and a devasting drought that reduced agricultural exports. Elevated inflation, fiscal consolidation efforts, and stringent financial circumstances will exert pressure on consumption throughout 2024, compounded by subdued confidence levels and heightened political uncertainty which will persistently impede investment. While the IMF expects growth to pick up to 2.8% this year, the OECD forecasts a further contraction of 1.3%. A gradual improvement is anticipated for 2025 as the macroeconomic environment strengthens and exports regain momentum.

The new government led by Milei, who took office in December 2023, faces the imperative task of consolidating public finances to stabilize the economy. A recently unveiled fiscal support initiative integrates a mix of worker subsidies, expanded income tax exemptions, and credit relief measures aimed at shielding households from soaring inflation. However, this temporary fiscal expansion is poised to exacerbate the strain on public finances, already affected by dwindling export tax revenues. The IMF estimated the fiscal deficit at 3.2% of GDP last year, with a reduction foreseen in 2024 (to 2.8%). Argentina's gross public debt rose to 89.5% of GDP in 2023 and is predominantly owed to domestic creditors, with a split of 64% domestic and 36% external. The primary creditors include local public sector agencies, accounting for 46% of the total, followed by the private sector, which includes both local entities and non-residents, holding 35% of the total debt. Multilateral and bilateral organizations constitute the remaining 19%. Approximately 33% of the total public debt is denominated in local currency, with a significant portion indexed to the USD or inflation. Inflation has surpassed 120% in 2023 - the highest inflation rate since the 1991 hyperinflation era - and may continue to rise in the near term due to expectations of a currency devaluation.

Despite challenges, the labour market remains resilient, with unemployment standing at 7.4% in 2023, although it increased compared to the previous year (6.8% - IMF). Nonetheless, informality has surged, nearing 40% of the labour force (OECD). The IMF expects the unemployment rate to remain relatively stable over the forecast horizon. The Argentine government has faced difficulties in fighting high levels of poverty, which affects more than 40% of the population, and the social situation of the country is characterised by constant underlying tensions between the Government and trade unions over the reforms announced. The country is also split between central and decentralised authorities over the distribution of federal revenues.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 630.66654.89604.26558.96592.49
GDP (Constant Prices, Annual % Change) 5.0-1.6-2.85.04.5
GDP per Capita (USD) 13,64014,02412,81211,73412,315
General Government Balance (in % of GDP) -4.3-3.70.51.0-0.2
General Government Gross Debt (in % of GDP) 84.7154.586.279.569.5
Inflation Rate (%) 72.4133.5249.859.631.8
Unemployment Rate (% of the Labour Force) 6.86.68.07.57.2
Current Account (billions USD) -4.29-22.705.505.015.91
Current Account (in % of GDP) -0.7-3.50.90.91.0

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

Despite recent economic struggles, Argentina continues to play an important role in the global economy, especially with regard to its agricultural production. The sector is mainly based on livestock farming, cereal cultivation (wheat, corn and transgenic soy), citrus fruits, tobacco, tea and grapes (mostly for the production of wine). Argentina is the world’s largest exporter of soy-derived products and the world’s third-largest producer of such products. Soy and sugar cane are extensively cultivated for biofuel production. As a result, the country is the world’s sixth-largest producer of biodiesel. The agricultural sector represents 6.6% of the country’s GDP and employs 8% of the population, according to the World Bank. Additionally, given that the country is rich in energy resources, Argentina also has great potential in terms of raw materials: it is the fourth-largest natural gas producer in Latin America, and it has the world's third-largest shale gas reserve and the fourth-largest lithium reserve. Agricultural exports are a key source of revenue for Argentina. Corn and wheat are the most important crops in terms of volume, with a combined production of 1.946 million tons in the 2022/23 season, representing a 65% increase compared to the last two decades.

According to the latest data from the World Bank, the industrial sector represents 24.2% of GDP and employs 20% of the population. Prominent sectors include food processing, automotive manufacturing, petrochemicals, and electronics. Historically, Argentina has been known for its agricultural output, and this remains a significant part of its industrial landscape, with food processing playing a vital role in the economy. Automotive manufacturing has also been a key sector, with several multinational companies operating in the country. In recent years, there has been a growing focus on renewable energy, particularly wind and solar power, as Argentina seeks to diversify its energy sources and reduce reliance on traditional fuels. During the first half of 2023, the industrial sector attained its peak activity level in at least seven years: according to official government figures, industrial output experienced a 1.9% increase compared to the previous year and surged by 12.8% compared to pre-pandemic levels (January-June 2019).

The service sector is the largest contributor to GDP, accounting for 53.1%, and it employs 72% of the active workforce. Key sectors include finance, tourism, telecommunications, healthcare, education, and retail. Finance, particularly banking and insurance, plays a crucial role in Argentina's economy. Telecommunications and technology services have seen rapid growth, with increasing internet penetration and mobile connectivity driving innovation and digital transformation. Healthcare and education sectors continue to expand, and retail and consumer services are also important. Tourism is pivotal and is estimated to account for almost 9% of the country’s GDP (data WTTC).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 7.7 20.0 72.4
Value Added (in % of GDP) 6.4 23.4 53.0
Value Added (Annual % Change) -3.8 6.0 6.2

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
52,7/100
World Rank:
148
Regional Rank:
26


 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
4.98/10
World Rank:
73/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

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Latest Update: June 2024

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