Argentina closes 2020 with one of the worst meltdowns in the entire region

Argentina will close 2020 as one of the hardest-hit economies in the world due to the coup that generated the containment by the Covid-19 pandemic and the two-year recession with high inflation already hanging around, as well as endless macroeconomic imbalances.

The Economic Commission for Latin America and the Caribbean (Cepal) has quantified the crisis and compared it between countries in the region. Although, he said, it could be worse if the debt had not been restructured and the state had not come out to meet social needs through subsidies.

“In Argentina, the amount of the first two rounds of the Emergency Family Income (IFE), intended for households in vulnerable situations, is added to the Emergency Assistance Program for Work and Production (ATP)”, he said.

The Executive Secretary of ECLAC, Alicia Bárcena, yesterday presented in virtual form the preliminary assessment of the economies of Latin America and the Caribbean 2020, one of the main annual reports of the United Nations.

There, a strong contraction is observed in both South America and Mexico and Central America during the second and third quarters of 2020. Depending on specialization and, to a greater extent, the degree of impact on their trading partners, countries have seen strongly affected by the decline in external demand.

They have also been affected by the internal effects of health measures adopted to contain the pandemic, which have resulted in lower internal demands and limitations in the production of non-essential goods and services, ECLAC said.

The balance sheet also had an impact. Argentina entered the pandemic by default and with the highest level of public debt (95.4% of GDP), followed by Brazil (90.6% of GDP) and Costa Rica (66.2% of GDP). GDP).

Argentina recorded a 19% drop in its gross domestic product (GDP) in the second quarter, so that in a group of 17 countries it was the fourth with the worst performance behind Venezuela, Peru and Bolivia. And in the third quarter, GDP contracted 10.2%. This placed Argentina with the second worst decline, only behind Venezuela.

ECLAC forecasts an average regional contraction of 7.7% for 2020, which will be the largest in the last 120 years. While for 2021, a rebound of 3.7% is expected. Thus, Latin America and the Caribbean have become the region of the developing world hardest hit by the crisis derived from Covid-19.

Barcena said the growth momentum in 2021 is subject to “high uncertainty” related to the risk of a pandemic epidemic, the agility to produce and distribute vaccines and the ability to maintain fiscal and monetary stimuli for support aggregate demand and production.

In this context, for ECLAC, the countries that are part of the International Monetary Fund must agree to generate mega financing through the distribution of special drawing rights of the organization to promote the recovery in 2021.

Very black numbers

In Argentina, the crisis seems to have been felt more strongly by an aggravating factor: it was in the peloton of those with the highest inflation recorded in 2020, with 35.2% per year until September. Haiti performed better with 25.1% while Suriname did less well with 45.1%. And the most serious case is that of Venezuela with hyperinflation of 1.813%. For Cepal, however, it is “important” that Argentina reduced its inflation from the low of 53.8% left by the macrismo.

If the inter-annual variation in the rate of work informality is observed in Latin America, Argentina recorded the worst record in the second quarter with a jump of 10.7% in a group of eight countries. On the contrary, it is the one that has obtained the greatest stability in terms of registered employment, according to data from the International Labor Organization cited by ECLAC.

In a group of twelve countries, Argentina was the fourth with the highest real year-to-year change in primary spending (23%) between January and September, behind El Salvador, Brazil and the Dominican Republic.

In the Argentinian and Venezuelan cases, credit to the private sector slowed and, in the third quarter, the decline was 11.3% in Argentina and 35% in Venezuela. In 2019, they had fallen by an average of 13.7% and 74.5%, respectively, according to Cepal.

Argentina’s gross domestic product (GDP) contracted 10.2% annually in the third quarter of 2020, as it rebounded 12.8% from the second quarter, where the pandemic and the confinement they hit the activity harder.

In the total of the first three quarters of the year, meanwhile, the drop was 11.8%, as reported yesterday by Indec. It will be necessary to wait for the data of the fourth quarter to know if the country fell by more or less than 10 points of GDP in 2020.

In the ministry commanded by Martín Guzmán (photo), they celebrated the rebound between quarters and said growth was driven by investment and private and public consumption. And they added that among the sectors that fell, the majority slowed their rate of contraction.