Executive summary
Further reforms will have significant pay-offs
Following years of unsustainable economic policies, Argentina has recently undertaken bold reforms and a turnaround in policies that has helped to avoid another crisis and stabilise the economy. Reforms such as those already implemented and those currently planned should help lay the foundations to raise the material living standards and well-being of all Argentinians, including the most vulnerable. Continuing the structural reform agenda to deliver better material living standards for all Argentinians will be crucial. Aligning key policy settings with the OECD average could increase GDP per capita by 15% in 10 years. Bringing down inflation and the fiscal deficit is necessary for these pay-offs to materialise.
Raising investment and productivity is the basis for sustainable income gains
Structural and institutional reforms encompassing regulation on product markets, labour markets, competition, taxes, infrastructure, education, trade policy and financial markets can raise investment and productivity, which is the basis for sustainable income gains. Such 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.
Protecting the poor and ensuring that growth is inclusive and sustainable are key priorities
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, and one out of five Argentinians at risk of falling into poverty. Reforms and a recovery of growth are expected to provide better job and income opportunities, although some current jobs may be lost in the transition. 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 to improve productivity and job quality for all Argentinians.