Argentina flag Argentina: Economic and Political Overview

The economic context of Argentina

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Argentina has a long history of political and economic instability - with significant growth fluctuations every year. In 2021, the country had an estimated growth in GDP of 7.5%, mainly driven by the recovery of investments and private consumption, as well as the vigour shown by exports favoured by the high prices of commodities. South America’s second largest economy is expected to continue to recover in the coming years, albeit at a slower pace, with the IMF predicting a GDP growth of 2.5% for 2022 and 2% for 2023.

Since 1950, Argentina has spent 33% of the time in recession, second in the world behind the Democratic Republic of Congo, according to the World Bank. The country's structurally high inflation increased in 2021 and hit an estimated 52.1%, according to the National Institute of Statistics and Censuses, in part because a large share of the fiscal deficit is monetised. In order to curb inflationary pressures, the Central Bank has kept the pace of currency depreciation below inflation in 2021. According to the IMF, general government balance in Argentina represented an estimated 0.7% of GDP, while public debt reached 104.5% in 2021. Furthermore, the country has been making progress in its US$40-billion debt renegotiation with the IMF, although an agreement is yet to be reached. Although the pandemic has significantly impacted the Argentine economy, the country has begun to recover. In 2021, the government continued implementing measures to counteract the economic crisis resulting from the pandemic, which included increased health spending, financial support for workers and vulnerable groups, price controls for food and medical supplies, and credit guarantees for bank lending to SMEs for the production of foods and basic supplies. Based on the government’s estimates, these measures added up to 2.1% of GDP in 2021 and are expected to total about 0.9% of GDP in 2022.

In 2021, the unemployment rate in Argentina fell to an estimated 10%, consistent with the economic recovery the country experienced. That downward trend is expected to continue in 2022 and 2023, when unemployment rates should reach 9.2%. However, even though formal employment has been rising, high labour informality remains a concern in the country. 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. Infrastructure net works require more investment as access to electricity and water in rural areas is not always ensured.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 451.82e389.06e455.17483.77476.49
GDP (Constant Prices, Annual % Change) -2.1-9.9e10.03.02.5
GDP per Capita (USD) 10,0548,572e9,92910,44810,189
General Government Balance (in % of GDP) -3.0-5.7e0.00.00.0
General Government Gross Debt (in % of GDP) 88.7102.80.00.00.0
Inflation Rate (%) 53.542.048.451.743.5
Unemployment Rate (% of the Labour Force) 9.811.6e10.09.29.2
Current Account (billions USD) -3.713.31e4.533.733.98
Current Account (in % of GDP) -0.80.91.00.80.8

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

Main Sectors of Industry

Despite recent economic struggles, Argentina continues to play an important role within the global economy, especially with regards 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 bio-fuel production. As a result, the country is the world’s largest exporter and sixth largest producer of bio-diesel. The agricultural sector represents 5.9% of the country’s GDP, but it only employs 0.06% of the population (World Bank figures for 2020 and 2019, respectively). Additionally, given that the country is rich in energy resources, Argentina also has a great potential in terms of raw materials: it is the fourth largest natural gas producer in Latin America, and they have the world's third largest shale gas reserve and the fourth largest lithium reserve. Agricultural exports are a key source of revenue for Argentina, especially as the country leaves a recession that has been exacerbated by the pandemic. In 2021, the country benefited from the high prices of agricultural commodities, with grain exports performing particularly well and reaching a record high.

The industrial sector has vastly expanded in recent years. According to the latest data from the World Bank, the sector represented 23.3% of GDP in 2020 and employed 21.8% of the population in 2019. Food processing and packaging - in particular meat packing, flour grinding and canning - and flour-milling are the country's main industries. The industrial sector also demonstrates strength in motor vehicles and auto parts, consumer durables, textiles, chemicals and petrochemicals, pharmaceuticals, printing, metallurgy and steel, industrial and farm machinery; electronics and home appliances. Industrial activity in Argentina registered a significant growth in 2021, with the greatest recovery being registered in the automotive industry, metallurgy and steel, construction materials, petroleum refining, and production of food and beverages. The measures adopted by the government to encourage consumption following the pandemic boosted expenditure of non-durable goods in 2021, while durable goods saw an increase in consumption as a result of inflation, as they are seen as a store of value in the face of the deterioration of the Argentine Peso.

The service sector is the largest contributor to GDP, accounting for 54.6%, and it employs 78.1% of the active workforce. Argentina has specialised in areas of high-tech services and is highly competitive in software development, call centres, nuclear energy and tourism. The telephone and ITC sectors are also developing dynamically, as well as tourism, which is increasingly becoming an important sector. However, that was one of the most affected sectors during the pandemic, as the number of tourists greatly decreased. To overturn that and to lighten the impact of tourism on inflation, the Argentine government put a lock on the prices of goods and services associated with tourism in 2021, such as hotels, airlines and restaurants.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 0.1 21.8 78.1
Value Added (in % of GDP) 6.8 22.5 54.3
Value Added (Annual % Change) -7.5 -9.4 -10.5

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

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

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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Sources of General Economic Information

Ministries
Official list of ministries
Website of the Argentine Republic
Ministry of Economy
Ministry of Agriculture, Livestock and Fisheries
Ministry of Foreign Affairs, International Trade and Worship
Statistical Office
National Institute of Statistics and Census (INDEC)
Central Bank
Central Bank of the Argentine Republic
Stock Exchange
Buenos Aires Stock Exchange
Economic Portals
Ministry of Economy and Public Finances
 

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Latest Update: June 2022