Argentina’s economy improves but still has not overcome the 2020 drop
RIO DE JANEIRO, BRAZIL – Argentina’s economy achieved in the first half of the year a year-on-year improvement of 9.7%. However, activity levels are still far from recovering all the ground lost last year when the already battered economy of the country suffered the onslaught of the Covid-19 pandemic.
According to the National Institute of Statistics and Censuses (Indec), economic activity grew by 10.8% in June compared to the same month in 2020, the fourth monthly year-on-year increase after 19 consecutive months of decline.
Read also: Check out our coverage on Argentina
This figure, however, must be interpreted on a feeble basis of comparison, since in June 2020, economic activity had fallen by 11.6%, still heavily affected by the severe sanitary restrictions imposed by the government of Alberto Fernández in the face of the outbreak of the pandemic.
On the other hand, the official report indicates that in June, the Argentine economy advanced 2.5% compared to May, thus breaking the stagnation trend registered since last February.
In this case, the improvement is explained by the progressive relaxation of the restrictions imposed in May, given the second wave of covid-19.
The balance of the first half leaves a double reading: there was an improvement, but with recovery at rates much lower than those seen in the second half of 2020, and the economy is still far from fully recovering from the 9.9% slump recorded last year and, even less, from the recession that had started in 2018.
“The rebound that had taken place in the third quarter of 2020 slowed to a halt. This is seen even in industry and construction, although they are the two sectors that move the most,” Leonardo Piazza, director of the consulting firm LP Consulting, told Efe.
For the consultant, “what is recovering in the economy is due to the inertia after having fallen so much and that some economic sectors, mainly the most punished, were able to get moving again and start invoicing.”
“But we do not see the creation of registered employment or formal companies. And not having an organized macroeconomy, there is a totally corseted economy that does not allow investments to come,” he pointed out.
BETWEEN DECONFINEMENT AND THE THIRD WAVE
Different sectoral indicators, as in the case of industry and construction, already show that there were better levels of activity in July and, foreseeably, in August, at the same time that the vaccination campaign is progressing in Argentina and that a better epidemiological situation has allowed leaving behind many sanitary restrictions.
This scenario has encouraged the government to raise its growth projections for this year to between 7% and 8%, from an original budget target of 5.5%.
According to the latest monthly survey conducted by the Central Bank, private economists have also revised their forecasts upwards for economic recovery to 6.8%.
“The outlook for economic activity remains in a recovery phase although at a lower level than the depth of the fall over the past year. In turn, the consolidation of this dynamic will depend on an eventual third wave of contagion,” observed economist Martín Calveira from the IAE Business School of the Austral University.
UNCERTAINTY
Uncertainty factors are latent and not only because of the health situation. Exchange rate tensions tend to increase at election time in Argentina, which will hold primaries in September and legislative elections in November.
In addition, macroeconomic imbalances persist, inflation is projected at around 50 % this year, and complex negotiations are underway with the International Monetary Fund (IMF) to refinance debts of 45.5 billion dollars, which will be unless a new agreement is reached difficult for Argentina to start paying.
“The recovery of economic activity is affected by an environment of greater uncertainty. Factors such as political management and the lack of a clear economic plan clearly affect economic decisions and the recovery,” said Calveira.
For Piazza, who maintains a 7% recovery projection for this year, it is essential that the public accounts be put in order and that a “structural and long-term” agreement be reached with the IMF.
More: Argentina news in English, every day from The Rio Times.
This article was produced by The Rio Times’ automated AI newsroom. Editorial responsibility: Matthias Camenzind, Publisher and Editor-in-Chief. The Rio Times also runs Ask Rio Times, which answers from 100,000+ of our own articles, the daily Latin America Power Map, and prediction-market odds on elections and markets.. How we use AI · Report an error