Some of the main issues related to Argentina economy are:
- High inflation: Argentina’s inflation rate surpassed 100% in February 2023, the highest level in 32 years. This means that prices are increasing rapidly and eroding the purchasing power of the peso. Inflation also makes it difficult for consumers and businesses to plan ahead and budget their spending.
- Currency devaluation: The central bank devalued the peso by close to 18% and hiked its benchmark interest rate by 21 percentage points to 118% on Monday, August 14, 2023, following a shock primary election win by far-right libertarian Javier Milei. The peso plunged to about 350 per dollar, while the unofficial exchange rate was much lower. The currency crisis has reduced Argentina’s foreign reserves and increased its external debt burden.
- Economic recession: Argentina’s economy is expected to contract by 1.6% in 2023 and then recover by 1.1% in 2024. The country has been suffering from low growth, high unemployment, and poverty for years. The COVID-19 pandemic and the lockdown measures have also taken a toll on the economic activity and social welfare.
- Political uncertainty: The surprise victory of Javier Milei in the presidential primary election has shaken the political landscape and raised doubts about the future direction of the Argentina economic policies. Milei has vowed to get rid of the central bank and dollarize Argentina’s economy, as well as to implement drastic spending cuts and reforms. However, many economists warn that his proposals could trigger financial chaos and social unrest.
