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Following years of unsustainable economic policies, Argentina has undertaken a bold turnaround in policies, which has helped to stabilise the economy and avoid another crisis. Building on this reform progress should help lay the foundations to raise the material living standards and well-being of all Argentinians, including the most vulnerable. This Survey discusses the challenges ahead and the policy options to address these challenges. Improvements in the areas of regulation on product markets, labour markets, competition, taxes, infrastructure, education, trade policy and financial markets would strenghten investment and productivity, which are the basis for sustainable income gains. Some of these reforms will involve adjustment costs as jobs will be lost in some firms and sectors and created in others, but well-designed policies can protect the poor and vulnerable from the burden of adjustment. A current focus on strengthening the social safety net and efforts to improve the quality of education are part of such policies, as is labour market support for affected workers. The benefits of stronger growth will depend on improving the distribution of income, which is currently very unequal and leaves one third of the population in poverty, with more at risk of falling into poverty. Efforts are also underway to reduce inequalities in the access to quality education. Public transfers to reduce inequality and poverty will continue to play an important role, together with stronger efforts to curb labour market informality.

SPECIAL FEATURES: PRODUCTIVITY; INCLUSIVE GROWTH

Over many decades, Argentina’s economy has been held back by weak policy settings and productivity has stagnated. Recent and additional reforms will help to raise prosperity for all Argentinians in the medium term. Strengthening competition by reducing barriers to market entry and foreign trade has particularly high payoffs. Tariff barriers have prevented a stronger integration into the world economy, which could raise consumer purchasing power, reduce the cost of firms’ inputs and lead companies in shielded sectors to become more productive. Currently, many jobs are trapped in activities with limited potential for productivity and wage growth. As job reallocation can result in temporary income losses, policies should ease the transition by enhancing training and social protection. Social policies are effective in reducing inequalities and poverty continued its declining trend during 2016 and 2017, until a severe economic crisis pushed the economy into a deep recession in 2018. This has shifted the immediate policy focus to restoring confidence and unwinding significant fiscal and external imbalances. Swift and decisive policy responses were necessary and their implementation will lay the grounds for a return of macroeconomic stability and a recovery from the recession, although significant risks remain.

SPECIAL FEATURE: FOSTERING INTEGRATION INTO THE WORLD ECONOMY