Mauricio Macri’s government has pulled Argentina’s economy out of isolation as his policies enabled it to swing back into growth in 2017 and to consolidate the central bank’s foreign reserves thanks to the inflow of portfolio investment, explains François Faure, Research Analyst at BNP Paribas.
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“Yet these policies also widened the current account deficit, increased the USD-denominated public debt and indirectly generated inflationary pressures.”
“The Argentine government has had to call on the IMF to stabilise the exchange rate. The stabilisation policy will plunge the economy back into stagnation, with an economic cost for the local population due to a very restrictive monetary policy and more demanding fiscal consolidation efforts than the government initially envisioned in late 2017.”
“Considering Argentina’s high foreign currency debt burden, the government faces a classic dilemma of needing to stabilise both the public debt and the external debt.”
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