Argentina: Economic Challenges in an Adverse International Setting

10 Pages Posted: 9 Nov 2018

See all articles by Xavier Serra

Xavier Serra

Banco de España

Jacopo Timini

Universidad Carlos III de Madrid; Banco de España; Centre for European Policy Studies (CEPS)

Enrique Martínez Casillas

Banco de España

Julia Estefanía

Banco de España

Date Written: November 5, 2018

Abstract

The Argentine economy is in a complicated transition phase. To correct the major fiscal and inflationary imbalances built up in the previous decade, the new government that took office in December 2015 opted for a gradual fiscal adjustment, supported by a situation of abundant international liquidity. In parallel, the Argentine central bank assumed ambitious inflation-reducing objectives. However, in 2018 the lack of progress on the inflation front, the tightening of international financial conditions and a severe drought placed Argentina under the market’s gaze and prevented it from pursuing the financing of this gradual adjustment; accordingly, the government decided to apply for IMF financial assistance. The agreement with the Fund, approved in June and amended in October 2018, plans for a rapid fiscal and monetary adjustment that will provide for a reduction in its twin deficits (fiscal and external alike) and an effective decline in inflation, moving the economy onto a stable growth path. The success of the programme, to which the Argentine authorities have made a clear commitment, is nonetheless subject to internal and external risks, and poses a significant challenge for the country.

Keywords: Argentina, IMF, Stand-By Arrangement (SBA), economic growth, macroeconomic risks, debt sustainability

JEL Classification: O11, O54

Suggested Citation

Serra, Xavier and Timini, Jacopo and Martínez Casillas, Enrique and Estefanía, Julia, Argentina: Economic Challenges in an Adverse International Setting (November 5, 2018). Banco de Espana Article 21/18. Available at SSRN: https://ssrn.com/abstract=3280900

Xavier Serra (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

HOME PAGE: http://www.bde.es/

Jacopo Timini

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, 28903
Spain

Banco de España

Alcala 50
Madrid 28014
Spain

Centre for European Policy Studies (CEPS) ( email )

1 Place du Congres, 1000
Brussels, 1000
Belgium

Enrique Martínez Casillas

Banco de España

Alcala 50
Madrid 28014
Spain

Julia Estefanía

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

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