Argentina’s economy has exceeded growth expectations for the third quarter of the year. The GDP expanded by 3.9% compared to the previous quarter, which annualizing the figure would give a growth close to 17% (using this science fiction indicator that Americans like so much). The market consensus expected growth of 3% quarter-on-quarter and a drop of 2.6% year-on-year. However, the final data were the aforementioned advance of 3.9%, compared to the previous quarter, and a drop of 2.1% year-on-year. But what is more important, analyzing this GDP data it is observed that there is a component that is triggeredFurthermore, this component is the one that holds the key to opening the door to future growth: private investment. Investment has skyrocketed thanks to deregulation (invisible hand), legal certainty and the awakening of Vaca Muerta, the country’s large unconventional oil field.
Juan Ramón Rallo, professor of Economics and one of the most popular economists in the country, has carried out an analysis in which he highlights “Argentina’s spectacular GDP growth data.” The expert points out that “Argentina grew almost 4% in the third quarter of 2024. Robust growth returns within a healthy macroeconomy.” Additionally, components how investment and consumption have pulled the economywhich shows that domestic demand can expand (thanks to the private sector) in the midst of a cycle of historic tax cuts due to their magnitude.
A good example of why investment has increased so intensely is in the sector known as ‘mines’ in Argentina, cIts growth has been 7.3% quarterlythus being the second that has grown the most after agriculture (this year the harvest has been very good). The mining sector includes oil and with it the investment being made in Vaca Muerta, the oil field that already produces more than 400,000 barrels of unconventional crude oil and that promises to be the key to achieving constant current account surpluses in Argentina , which will lead to a greater inflow of dollars to ‘tie’ the peso exchange rate. But in addition, the investment in Vaca Muerta is accounted for in the GDP in the brutal formation of fixed capital (GFCF), increasing current production and generating better expectations for the future.
Daniel Fernández, economist and professor at the Francisco Marroquín University, points out that “growth is explained by an increase in capital formation while the State withdraws from the economy. The brutal formation of fixed capital had suffered greatly in recent quarters (as is typical in an economic recession). In this third quarter of the year, the main driver of economic growth has been this investment in fixed capital, which grows no less than 12% with respect to the figure recorded in the previous quarter,” says the expert. In addition to deregulation and liberalization, the investment appetite in large projects in the real economy is awakening thanks to the new regime of incentives for large investments (RIGI), which encourages investments of more than 200 million dollars with certain advantages.
It is also worth noting that this component came from several quarters of declines, so part of the increase is due to the so-called base effect and its intrinsic volatility. The ‘Invisible Hand’ is a kind of metaphor inspired by the Scottish economist Adam Smith which describes the incentives that free markets usually create for society to prosper without the need to intervene (each person seeking their own well-being and interest drives the prosperity of the rest).
This same economist, an expert in Latin American economies, believes that “it is also worth highlighting the contribution hardly any public consumption in the economic growth of Argentina. “The good economic growth data is occurring, unlike what happened under Kirchnerism, without an increase in public consumption.”
For example, this week it was published that Argentina achieved last November chain eleven consecutive months with a primary fiscal surplus and four with a positive balance in the financial result thanks to the severe adjustment plan launched at the end of 2023 by the president Javier Milei. As reported this Tuesday by the Ministry of Economy, the country registered a primary fiscal surplus of 1.3 trillion pesos (1,242 million euros) in November, compared to a negative result in the same month of 2023 of 210,484 million pesos.
There are already eleven fiscal surpluses
The November result was also above the primary surplus achieved last October, which was 746,921 million pesos. Meanwhile, the financial result (includes the payment of debt services) was 357,162 million pesos in November, compared to a deficit in the same month last year of 754,956 million pesos and a surplus of 523,398 million pesos last October .
In the first eleven months of the year, Argentina managed to accumulate a primary surplus of 11.7 trillion pesos, compared to a deficit in the same period of 2023 of 3.1 trillion pesos. The financial surplus accumulated in the first eleven months of the year amounts to 3.3 trillion pesos, compared to a negative balance in the same period of 2023 of 6 trillion pesos. As highlighted by the Ministry of Economy, in the first eleven months of the year the national public sector accumulated a financial surplus equivalent to 0.6% of GDP and a primary surplus of 2.1% of GDP.
All in all, “the Argentine economy shines in the third quarter of 2024, so much so that it recovers practically all the ground lost in the first two quarters of the year. Given this situation, the possibilities that the year 2024 ends with economic growth begin to appear. be truly great (despite the fact that practically no one was betting on it at the beginning of the year)”.
Meanwhile, the country risk continues to fall and now stands at 673 points, when at the beginning of 2024 it exceeded 2,000, This Thursday the differential with the US bond stands at 653 pointslevels that have not been seen since February 2019.
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