According to a report released by The Economist Intelligence Unit – part of the UK Economist Group – Argentina’s GDP is projected to grow at a rate of 3% every year from now until 2020. The study cites President Macri’s economic policies as a key underlying factor making room for the country to see inflation decrease to “single digits by 2019”.
As reported by Infobae, the study anticipates a growth of 2.7% next year, 4% in 2018, 3.2% in 2019, and 3.4% in 2020; these numbers contrast against Argentina’s GDP which grew 2.4% in 2015 but went down to 1.6% this year.
“The position of Argentina in our ranking will improve considerably between the historical and projection periods. The weak historical classification reflects the heritage of distorting and expansionary macroeconomic policy, with a deterioration in the legal and regulatory framework,” the study says. The weak score of the “macroeconomic environment” between 2011-2015 is attributed to the “politicized Central Bank basing monetary decisions on fiscal government demands and highly questionable statistics.”
Macri is a “key person to watch” the study says. His economic policies have resulted in the continuance of praise from Western media and leaders, including President Obama and even recently, Joe Biden.
The study points out the issue of inflation as being “one of the main challenges” that the Macri government has to face, but projects that that number will reach the single digits by 2019 or 2020. The Economist Intelligence Unit estimated the rate to be at “26.5% in 2015, with a ceiling of 42.8% accumulated in 2016. However, (there is) a noticeable slowdown in the coming years: 23.5% (2017); 13.6% (2018) to place it in one digit in 2019 (9.4%) and 2020 (7.9%).”
The study also points out Macri’s policies as more “investor-friendly” than those of the former government and suggests that improvements could go even further than the projections. However, the Intelligence Unit also cautioned that the president’s approach could also cause backlash due to being seen as a radical break from the policies some in the country grew to support in the past and could result in clashes with the county’s notoriously strong unions. There will be a “adjustment process” before this growth becomes long-term.
The report focuses on the instability of the exchange rate in Argentina. “A dollar for foreign trade averaged AR $9.20 in 2015 and stabilized at about AR $14.90 this year.” The Economist predicts that one USD dollar will average out at AR $17.10 in 2017 with “an upward trend in the future: AR $18.80 in 2018; AR $20.40 in 2019 and AR $21.80 by 2020.”
The study predicts that the GDP will grow to “US $ 585.2 billion by 2017 and will near USD 693.7 billion in 2020.”
All in all, the report had a positive message for Argentina’s potential to grow economically over the next few years – this coming in contrast to the conflicting reports made previously. One such report coming directly from Macri himself disputing prior claims that Argentina would grow in the second semester of this year.
Only time will tell whether the continuing praise and optimism of the West’s media and politicians will align with real and sustainable growth for the Argentine economy.