Moderate pickup expected this year
Sales of agricultural products are expected to increase. The auto industry should also strengthen, as it benefits from exports to Brazil. It shrank last year as domestic demand cooled and import rules delayed the entry of foreign-made parts.
We expect GDP growth to pick up to 3% this year, from an estimated 1.9% in 2012. This is little changed from our view in the last edition. Our forecast assumes a better outlook for world growth and, in particular, faster expansion in Brazil, Argentina’s main trading partner. This should result in a pickup in exports. We also expect investment to recover as confidence improves. In 2014 and 2015, GDP growth should be close to 4.5%.
The opportunities for longer-term growth in Argentina depend in part on the ability of the authorities to contain high rates of inflation. The official CPI inflation rate averaged 10% last year and we expect it to remain over 10% both this year and next. Wages are struggling to keep up, which is holding back consumer demand. Argentina is rich in natural resources and has a well-educated workforce. So the outlook would improve if remedial measures can be put in place.
GDP and industrial production
Source: Oxford Economics.
World: commodity prices
Source: Commodity Research Bureau; Haver Analytics.
* Private estimates put the true rate of inflation closer to 25%.
Visit the ey.com Argentina page here