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Argentina’s Double Challenge: Economic Recession and Fiscal Adjustment


Feb 11, 2024

According to the INDEC manufacturing production index, 2023 was the worst year for the national industry in almost a decade. Only one month in 2019 and three in 2020 recorded records lower than the average drop of 12.8% in December 2023. This resulted in a conglomerate of factory activities in the red, with figures below zero compared to December 2022. Sectors like agricultural machinery, steel, electrical equipment, appliances, and base metals saw significant drops.

The production of food and drinks in Argentina also suffered from the shock, with significant hits to beef and oilseed grinding. Informal employment, without labor or social coverage, and without the support of joint negotiations, now reaches around 47% of existing employment throughout the country. This raises concerns about the quality, stability, and productivity of jobs, along with deteriorating salaries.

The decline in the industry has long been established in Argentina, leading to challenges with low-quality jobs and a lack of development and progress. The construction sector experienced figures almost identical to those of industrial production, with a notable decline in December 2023.

Concerns remain about the short-term business expectations, with employers expressing pessimism in terms of domestic demand, exports, hiring, and working hours. The lack of an effective anti-inflationary policy is also contributing to the industry’s decline.

The Monetary Fund has set a decline of 2.8% for this year, while a survey conducted by the Central Bank indicates a projected 3% GDP fall, mostly concentrated in the first quarter of the year.

Retail sales, surveyed by CAME, show significant drops across various sectors, raising concerns about inflation. The overall economic picture is one of stagnation with widespread inflation, affecting vulnerable social sectors.

There are questions about the government’s approach to addressing these economic challenges, particularly with regard to fiscal adjustments and meeting commitments with the International Monetary Fund. The absence of a clear plan to tackle stagnation and inflation is a notable concern.

Ultimately, the world of money and market demands clash with the challenges facing the vulnerable sectors of society. The need for effective policy measures to address the economic decline is clear, but there are questions about the government’s ability to effectively navigate these challenges.

By Editor

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