President Mauricio Macri’s government made important progress in his drive to liberalize the economy. The 2018 budget and a highly controversial tax and pension reform plan were approved by the congress in the final weeks of 2017. The pension and tax reform envisages lowering the government’s elevated public sector spending and making Argentina a more attractive investment destination. It should give a further impetus to the economy, which is on a solid recovery path, as confirmed by the latest data. Economic growth reached 4.2% annually in Q3, a notable acceleration from Q2’s 2.9% expansion and the fastest print in over four years. Despite strong GDP growth, the economy remains under pressure. On 28 December, the Central Bank revised its inflation target for the next two years, as the country missed its 2017 target and tight monetary conditions are stifling economic activity. The announcement caused the peso to depreciate sharply and will likely undermine the Bank’s credibility in anchoring inflation and achieving the government’s fiscal reduction plans.

Argentina Economic Growth

Argentina’s economy is set to accelerate in 2018 and 2019 amid solid growth in private consumption and fixed investment. FocusEconomics panelists see the economy expanding 3.0% in 2018, which is down 0.1 percentage points from last month’s forecast. For 2019, growth is expected to reach 3.2%.