In 2023, Argentina is expected to experience a decrease in its gross domestic product (GDP) of 1.5% year-on-year in the final quarter, marking the third consecutive annualized contraction. This decline is attributed to decreases in almost all sectors of the economy, according to a Reuters poll. The country likely contracted around 1.6% last year and analysts predict another contraction this year.
The new libertarian President, Javier Milei, is implementing tough austerity measures in an attempt to address high inflation and deep deficit. While these measures have improved the government’s financial situation and helped control prices, they have had a negative impact on economic activity, production, and consumption. The country’s primary and tradable sectors like farming and energy are expected to fare better in the challenging economic environment.
Economist Pablo Besmedrisnik noted that most sectors of the economy are experiencing a deepening contraction, particularly those associated with consumption. However, primary and tradable sectors like farming and energy are expected to fare better in the challenging economic environment. Besmedrisnik also highlighted the impact of contractionary fiscal policies, reduced availability of pesos, unadjusted relative prices, and low wages and pensions on the overall economic activity. The analysts surveyed by Reuters estimate a contraction in the October-December quarter ranging from 1.1% to 1.8%.
Despite the challenges facing the economy, the government is working on implementing strategies to address the economic downturn and stimulate growth in the future.
