Georgetown Americas Institute

Argentina’s economic challenges over the last few years have grown increasingly complex as emergent crises and interventionist policy choices created an increasingly unstable macroeconomic environment.  In that context, the worst drought in a century has further weakened the economy, while the government is once again negotiating with the International Monetary Fund (IMF) to restructure the country’s IMF program. To reflect on these developments and on a possible path forward for the country, GAI hosted a conversation with Guido Sandleris, who served as the governor of Argentina’s Central Bank from 2018 to 2019. He is also a visiting professor of international economics at SAIS Europe and a professor of economics at the Universidad Torcuato Di Tella in Argentina.

Perspectives on a Protracted Crisis

 “In a nutshell, Argentina’s economic performance has been very poor in a region that has also performed poorly in recent years.” -Guido Sandleris

As Sandleris explained, Argentina’s economic woes are not a new story. History since 1970 has been marked by slow growth, recurrent crises, and frequently high inflation. Between 1970 and 2019, annual GDP growth averaged at 0.7%, significantly underperforming when compared to the rest of the region. Similarly, in that period the country spent 22 years in recession and had 39 years with inflation over 20%. The country only had 8 years in which it enjoyed both positive GDP growth and inflation below 10%. Sandleris argued that the root behind these problems is essentially fiscal, for since 1970 Argentina has only had 5 yeats with budget surpluses and 13 with primary budget surpluses.

Sandleris explained how public sector primary spending has balooned since Nestor Kirchner became president in 2003. In 2002 state spending had accounted for 22.4% of GDP, but by 2015 it had nearly doubled to 41.4% as the Kirchner administrations sustained an increasing fiscal deficit. Subsequent attempts to balance the budget under Mauricio Macri’s brought the share down to 36.2%, but the pandemic and policy choices made under the Fernández administrtion since 2020 have once again raised spending. The country’s economic growth has been stagnant for over a decade now. As a consequence, GDP per capita in 2023 is the same as it was in 2006.

According to Sandleris, the current administration’s economic policy can be explained as high public spending made possible through high monetary financing. This allows for more disposable income which provides short-lived growth but also leads to rising inflation and increased pressure on the foreign exchange market. In turn, market interventions to control prices and exchange rates lead to import restrictions and the freezing of utility bills, creating market disturbances that decrease economic activity and defund public services such as electricity. These macroeconomic challenges however are underlined by an international environment in which Argentina has a lot of potential for growth.