All eyes on Argentina's economy recovery in 2016

February 23
6:15 PM 2016

Consumers, investors and economists are eagerly looking to the signs of recovery in Argentina. When will the real recovery begins in 2016 is a million dollar question now after recording $3 billion trade deficit for 2015. Led by new President Mauricio Macri, Argentina is expected to make a rebound this year. 

On the lines of other Latin American nations, Argentina is also facing rough weather in foreign trade amid slump in global commodities market with its exports falling over 50 percent in 2015. The neighboring countries such as Brazil are also suffering from economy slowdown.

Forbes reports that several industry majors are planning to cut down their operations in Argentina. The latest to reduce production is General Motors (GM) as automobile production in Argentina is dropping in double digits from 2015 onwards. Citigroup is also in the process of selling its retail unit in Argentina and Brazil. 

Argentina's new President Mauricio Macri is supported by business community. Led by Macri, Argentina is expected to begin recovering this year. A US court on February 19 lifted an injunction on Argentina that was barring it from issuing bonds. Now, the Latin American country can issue new bonds raising funds. 

Judge Thomas Griesa said, "Put simply, President Macri's election changed everything. The Republic has shown a good-faith willingness to negotiate with the holdouts."

Coming to the economic factor, the gross domestic product (GDP) growth rate slowed down to one percent in 2014 and further contracted in 2015. The annualized GDP growth rate for 2015 was 0.6 percent. The economic recession in Brazil, the largest economy in Latin America, is also impacting Argentina. Latin American nations were decelerated further in fourth quarter of 2015 owing to mismanagement of public policies. This further affected credit cycle of Argentina, according to Focus Economics.

Jason Marczak, the Director of the Latin America Economic Growth Initiative at the Adrienne Arsht Latin America Center in Washington, D.C, says voters opposed Cristina Fernández de Kirchner, who ruled Argentina for eight years.

"Voters elected Mauricio Macri, who promised to restore Argentine economy and tackle the root causes of the deep malaise pervading across society. He is already acting on this promise," said Marczak.

The total GDP in Argentina is predicted to be $510 billion by the first quarter of 2016, against $538 billion in 2015. The GDP on the other hand, is likely to be $610 billion by 2020, as reported by Trading Economics. However, GDP per capita is expected to grow to $7,961 from $7,956 annually. Agriculture accounts for over 50 percent of GDP followed by construction, manufacturing and mining sectors.

Despite some signs of optimism, Argentina is suffering its worst inflation. On e-Commerce front, Argentina-based companies have shown impressive performance, but global retail majors Amazon and Wal-Mart are keen on Mexico. 

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