Argentina's Economic Rebound Will Slow In 2022 As Political Headwinds Strengthen

• Fitch Solutions forecasts that Argentina will post a current account deficit of 0.7% of GDP in 2021 and 1.5% in 2022 (from a surplus of 0.9% in 2020), narrow shortfalls relative to recent years as multi-year high soybean prices support export earnings.
• Fitch Solutions have revised its real GDP growth forecast for Argentina to 6.2% for 2021, from 5.6% previously, due to a stronger than anticipated Q2 2021 and expected stimulus efforts in H2 2021. This will see the country exiting the three-year recession, but remaining subdued by an ongoing crisis of confidence among households and firms.
• The 2022 growth forecast was revised down to 3.3%, from 5.7% previously, as political headwinds will likely prevent a sustained rebound in consumption and investment.
• Several factors underpin this view, including the fact that the government will likely need to scale back its deficit spending as a condition of renegotiating its debt repayments to the IMF, as well as the expectation of multi-year high commodity prices (particularly soybean), which will leave the government with fewer resources to support its stimulus efforts.
• The forecasts imply that the Argentine economy will not return its peak size (reached in 2017) until 2025, among the slowest recoveries in the region.

(Source: Fitch Solutions)