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- GDP (PPP):
- $972.0 billion
- 1.2% growth
- 2.7% 5-year compound annual growth
- $22,554 per capita
- Inflation (CPI):
- FDI Inflow:
The government of Argentina has implemented several significant economic policy changes since December 2015, including such critical reforms as modernization of the import regime, reduction of inflation, and reform of the national statistics system. The 2016 settlement with creditors has allowed Argentina to access international capital markets for the first time in 15 years.
Substantial policy adjustments have sent a strong signal that the new government is committed to reform, ending the former government’s period of heavy government interventionism. The economy has been placed on a sounder footing, but much remains to be done in terms of further institutional and structural reform to restore Argentina to its former levels of economic freedom.
Argentina, once one of the world’s wealthiest nations, is South America’s second-largest country. It has vast agricultural and mineral resources and a highly educated population, but its long history of political and economic instability is the biggest challenge confronting center-right President Mauricio Macri. Upon taking office in December 2015, Macri immediately floated the peso exchange rate, reentered global capital markets, reduced costly electricity and other energy subsidies, and scaled back belligerent claims to the Falkland Islands. Macri’s more moderate policy agenda has repositioned an Argentina that had drifted far outside the mainstream of the international community into a country that is increasingly attractive to foreign investors.
Secured interests in property are recognized and enforced. The government adheres to most treaties and international agreements on intellectual property, although deficiencies persist within the patent and regulatory data protection regimes. Given the president’s minority position in Congress, the pace of reforms to reduce bureaucracy and corruption and enhance the effectiveness and independence of the judiciary will be slow.
The top individual and corporate tax rates remain at 35 percent. Other taxes include a value-added tax, a wealth tax, and a tax on financial transactions. The overall tax burden equals 35.9 percent of total domestic income. Government spending has amounted to 38.9 percent of total output (GDP) over the past three years, and budget deficits have averaged 4.8 percent of GDP. Public debt is equivalent to 56.5 percent of GDP.
The Macri administration has pursued a range of measures to improve the efficiency of business regulation. In May 2016, the president vetoed a labor law that would have kept firms from dismissing workers, arguing that it would depress the employment outlook by deterring investment. The new government has reduced subsidies on electricity and raised prices on gas, water, and public transportation in an effort to cut the budget deficit.
Trade is moderately important to Argentina’s economy; the value of exports and imports taken together equals 29 percent of GDP. The average applied tariff rate is 6.6 percent. Nontariff barriers interfere with trade, but barriers to foreign exchange have been relaxed. The small financial sector accounts for less than 3 percent of GDP. The presence of foreign banks has increased, and total assets have risen to approximately 30 percent.