Argentina: Economic and Political Overview
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Argentina has a long history of political and economic instability - with significant growth fluctuations every year. In 2022, the country had an estimated growth in GDP of 4%, mainly driven by private consumption and the recovery of sectors that were previously affected by the pandemic. However, South America’s second largest economy is expected to grow at a slower pace in coming years, with the IMF predicting a GDP growth of 2% for 2023 and 2024, as monetary tightening and price pressures are expected to weaken labour markets and private consumption.
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 2022 and hit an estimated 72.4%, according to the IMF, as a large share of the fiscal deficit was monetised and the Peso depreciated as a result of the government's lack of a credible economic plan. In order to curb inflationary pressures, the government has implemented new currency exchange rates to the more than 10 that already exist in Argentina. According to the IMF, general government balance in Argentina represented an estimated -3.8% of GDP, while public debt reached 76% in 2022. Furthermore, the country has been making progress in its US$40-billion debt renegotiation with the IMF, and reached an agreement in 2022. As such, the country is expected to continue on its path to further reduce macroeconomic imbalance and restore fiscal order in the coming years. Although the pandemic has significantly impacted the Argentine economy, the country has been recovering, with the government implementing measures to counteract the economic crisis resulting from it.
In 2022, the unemployment rate in Argentina fell to an estimated 6.9%, consistent with the economic recovery the country experienced, and it is expected to remain unchanged in 2023 and 2024. 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 | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
| GDP (billions USD) | 389.06 | 486.70 | 632.24 | 641.10 | 638.58 |
| GDP (Constant Prices, Annual % Change) | -9.9 | 10.4 | 5.2 | 0.2 | 2.0 |
| GDP per Capita (USD) | 8,572 | 10,617 | 13,655 | 13,709 | 13,520 |
| General Government Balance (in % of GDP) | -5.2 | -3.5 | -4.2 | -3.7 | -3.5 |
| General Government Gross Debt (in % of GDP) | 102.8 | 80.9 | 84.5 | 76.3 | 73.6 |
| Inflation Rate (%) | 42.0 | 48.4 | 72.4 | 98.6 | 60.1 |
| Unemployment Rate (% of the Labour Force) | 11.6 | 8.8 | 7.0 | 7.6 | 7.4 |
| Current Account (billions USD) | 3.09 | 6.74 | -4.12 | 6.32 | 5.27 |
| Current Account (in % of GDP) | 0.8 | 1.4 | -0.7 | 1.0 | 0.8 |
Source: IMF – World Economic Outlook Database, October 2021
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 7.1% of the country’s GDP, but it only employs 0.1% of the population, according to the World Bank. 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. However, in 2022, Argentina experienced the worst drought in decades, which significantly impacted the country's wheat, corn, and soy crops.
The industrial sector has vastly expanded in recent years. According to the latest data from the World Bank, the sector represents 23.6% of GDP and employs 21.8% of the population. 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 continued to experience growth in 2022, registering a steady recovery from the impacts of the pandemic.
The service sector is the largest contributor to GDP, accounting for 52.5%, 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. In 2022, tourism experienced a significant growth as the depreciation of the Peso made the country an attractive destination for foreign visitors. As a result, the number of tourists in Argentina bounced back to pre-pandemic levels in 2022.
| 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) | 7.1 | 23.6 | 52.5 |
| Value Added (Annual % Change) | 0.7 | 15.3 | 9.0 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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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.}}
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.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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Latest Update: September 2023
