No menu items!

COSTA RICA'S LEADING ENGLISH LANGUAGE NEWSPAPER

HomeLatin AmericaArgentinaFive keys to Argentina's economic crisis

Five keys to Argentina’s economic crisis

South America’s third biggest economy is in “virtual default,” according to Argentina’s President Alberto Fernandez, who claims it is suffering a similar crisis to the worst of its history in 2001.

Mired in recession, with sky-high poverty, inflation and unemployment, Argentina’s GDP is expected to fall by 3.1 percent in 2019.

Center-leftist Fernandez has blamed his market-friendly predecessor Mauricio Macri’s austerity measures for Argentina’s economic woes.

Fernandez has announced tax hikes on foreign currency purchases, agricultural exports and car sales while pledging a  10,000 ($160) peso bonus for pensioners and a six-month freeze on public utility prices.

Here, AFP looks at the five keys to Argentina’s economic crisis and the task facing Fernandez to try to solve the country’s problems.

– Inflation –

Argentina is one of the few countries in the International Monetary Fund’s emerging market and developing economies that has failed to control inflation. While the average for the group is expected to end 2019 at 4.7 percent, the IMF predicts Argentina will hit 57 percent: outstripped only by Venezuela and Zimbabwe.

Already in 2018, Argentina registered inflation of 47.6 percent, worsening a situation that began with its 2001 crisis after the country ended its 11-year-old policy of pegging the peso to the US dollar.

Argentina’s crisis was sparked by a sudden crash in the pesos’s value 18 months ago. It lost more than 50 percent in 2018 and is down another 38 percent this year.

The rampant inflation and falling value of the peso has hit Argentines’ spending power drastically.

– Recession –

Argentina has been in recession since the second quarter of 2018. Last year, the economy shrank by 2.5 percent. The IMF expects the economy to shrink by another 3.1 percent this year and 1.3 percent in 2020. It has already contracted for the last 17 months in a row.

The new government is hoping to stimulate the economy by encouraging buying and refunding taxes to small and medium-sized businesses — an important sector in the bid to prevent unemployment, which has hit almost 10 percent, from continuing to increase.

– Poverty –

Rising poverty, which currently affects 41 percent of Argentina’s 44 million people, is one of the biggest concerns. Earlier this year, Congress adopted a food emergency law to allocate greater resources to social programs.

Fernandez has launched a plan alongside businesses and social organizations to “tackle hunger” by distributing food stamps.

– Deficit –

Macri’s tough austerity measures enabled Argentina to reduce its primary fiscal deficit from almost 7.0 percent of GDP in 2015 to an estimated 0.9 percent this year.

In return, the International Monetary Fund agreed to a bail-out loan of $57 billion, some $44 billion of which has been disbursed. However, Fernandez has said he will refuse the remainder.

– Debt –

Debt has risen to $335 billion, including the IMF loan. The IMF expects Argentina’s debt as a percentage of GDP to reach 93 percent by the end of the year, compared with 53 percent when Macri came to power.

Fernandez says Argentina is in “virtual default” and blames Macri’s government for leaving his administration in a position where it cannot pay its debt.

The government has stressed that Argentina wants to pay its debt but insists that “to be able to pay, we have to be able to, and for that, there needs to be growth.”

In the meantime, the country unilaterally postponed a $9 billion maturities payment until August, a move that saw rating agencies Fitch and S&P downgrade its credit rating, though Fitch later reversed that.

Trending Now

Cosby Show Star Malcolm-Jamal Warner Dies in Costa Rica Drowning Accident

Malcolm-Jamal Warner passed away at 54 from an accidental drowning. He gained fame as Theo Huxtable on "The Cosby Show," playing the son in...

El Salvador at Center of Controversial U.S.-Venezuela Detainee Exchange

Salvadoran President Nayib Bukele received the 10 Americans exchanged on Friday between Washington and Caracas for 252 Venezuelans who had spent four months in...

Costa Rica’s Olympic Hero Claudia Poll Alleges Abuse by Famed Swim Coach

Claudia Poll, Costa Rica's only Olympic gold medalist, and two other former swimmers from the country, alleged on Monday that they suffered psychological, physical,...

Keylor Navas Joins Pumas UNAM in Major Liga MX Transfer

Keylor Navas has agreed to become the new goalkeeper for Pumas UNAM, marking one of the biggest signings in recent Liga MX history. The...

El Salvador NGO Flees to Guatemala as Bukele Intensifies Crackdown on Critics

The prestigious NGO Cristosal, which investigates corruption cases and denounces human rights violations in El Salvador, announced Thursday that it has been forced into...

Exiled NGO Slams Bukele’s Rule as Repeat of Authoritarian Past

Salvadorans deserve “something better” than living between “gangs or dictatorship,” said Noah Bullock, director of the influential NGO Cristosal, in an interview. On Thursday,...
spot_img
Costa Rica Coffee Maker Chorreador
Costa Rica Coffee Maker Chorreador
Costa Rica Travel Insurance
Costa Rica Rocking Chait
Costa Rica Travel

Latest News from Costa Rica