Argentina is to release its second quarter GDP growth rate today. Even before the affect of the COVID-19 lockdown could
Argentina is to release its second quarter GDP growth rate today.
Even before the affect of the COVID-19 lockdown could be fully measured, Argentina’s annual GDP growth rate fell 5.4% in the first quarter of 2020. The lockdown, which was instituted on March 20 and remains in place today, has further damaged the country’s economy, especially by forcing small businesses to close down.
Thus far, the current state of the economy signals that a massive 19.1% decline in annual GDP growth rate is likely for the second quarter of 2020. Meanwhile, mounting state interventionism in the economy is prompting companies to rethink their investments in Argentina. Major companies such as South America’s largest airline LATAM airlines and Chilean retail giant Falabella have already announced their exit from the country.
Although President Albert Fernandez managed to restructure $65 billion in foreign debt after the country’s ninth default, expect Argentina’s economic woes to continue in the near-term. A large 12% GDP contraction is likely this year, with the recovery in 2021 only expected to reach 5%. In the long-term, many expect a serious devaluation in the Argentine peso given the government’s attempt to finance COVID-19 relief measures by increasingly printing money. Meanwhile, the recently placed capital controls are unlikely to stop the fall of the peso, while also restricting companies from accessing US dollar reserves.
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