Tackling inflation which soared to 211% last year is top priority in 2024.

Santander Argentina’s economists analyse the prospects for Latin America’s third-largest economy. 

Devaluing the peso by 50% in December was one of the key elements of a package of measures designed to stabilise the economy and bring down inflation. In 2023 inflation rose to 211%, the highest level in 32 years, according to the national INDEC statistics agency. 

Fiscal convergence towards the official deficit target of 0% of GDP will also have a key role to improve Argentina’s debt position and make it sustainable. These drivers can be the starting point to improve the country’s access to credit, stabilise the economy and stimulate growth and employment.

The country felt the impact of a severe drought last year that strongly affected agricultural production (where the country lost around USD 20 billion in exports). The situation is projected to change drastically this year, with the expectation of an excellent harvest in a country where the agricultural sector is a vital component of the economy and for the external sector. In this sense, the World Bank expects GDP to fall by 2.5% this year, with an impact on the non-agricultural sector.

Argentina has enormous growth potential if it can navigate to a more favourable economic landscape with lower interest rates and less volatile commodity prices.

The country's agricultural sector has the capacity to feed 400 million people and could generate nearly $15 billion in additional exports by 2024 thanks to a significantly improved harvest. The recently inaugurated Vaca Muerta pipeline will sharply reduce dependence on energy imports and enable the country to achieve an energy surplus. 

Argentina is focusing on energy, mining, and agriculture for rapid growth. Boosting exports for key resources like oil and gas, lithium, and the agricultural sector, in general, is a priority. 

Developing more energy and mineral resources would provide more foreign currency inflows to the country. We expect that government fiscal convergence and improved foreign currency inflows will enable Argentina to improve its debt profile and make its commitments to creditors more sustainable. 

Being viewed more favourably by international markets would be a major boost to the financial sector, allowing institutions to expand credit that, in time, generate higher economic growth.