Argentina's Economy Will Stay Slow In 2014, But It Will Not Slide Into Recession

on January 10 2014 6:05 AM
Argentina Peso Peron 2012
Argentina's President Cristina Fernandez de Kirchner unveils a large scale bill of the new 100 pesos bank note with a portrait of former First Lady Eva Peron to commemorate Thursday's 60th anniversary of Eva's death, during a ceremony at the Casa Rosada Presidential Palace in Buenos Aires. Reuters

What a year Argentina had. Between rampant inflation, a plummeting currency and oil woes, the third-largest economy in Latin America did not have a moment to breathe in 2013. But, despite the struggle, Argentina managed to close the year with a GDP growth of 4.5 percent -- a better showing than the two largest economies in the region.

The new year is shaping up in a similar fashion, meaning that inflation and unemployment will continue to be familiar trends. However, the country will not enter recession as initially feared, according to the United Nations Economic Commission for Latin America. The organization has predicted that, in 2014, the country's GDP will grow 3.2 percent thanks to a favorable international trade climate, but it will continue to wrestle with financial volatility and uncertain policies.

“In contrast with the good results in the economy, some issues remain frail, like the government budget balance and a limit to external credit,” the report said.

Juan Alberto Fuentes explained that one of the less mentioned reasons for the slowdown in Argentina’s economy was climate change. “Draught has translated in worse crops, which have affected the economy,” he said. As a result, agriculture will recover only slowly, dragging down the overall pace of growth this year.

Manufacturers and industry too will keep growing modestly but, oil remains the wild card in the economic equation, with state-owned YPF placing all its bets on the Vaca Muerta shale oil and gas field. 

The national currency, the Argentinean peso, had a hard year: with a drop of 20 percent in exchange to the American dollar in 2013, it was the third-most devalued currency in the region. The rate is currently 6.6 pesos to a dollar -- though that value spikes when the exchange is performed in the black market, an issue that the government has tried, unsuccesfully, to control.

Fuentes said that the currency will be more stable in the new year, as a result of a steadier economy. 

 

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