BUENOS AIRES, July 22 (Xinhua) — In the first half of 2022, Argentina’s economy was a mixed bag of positive growth indicators and record exports along with double-digit inflation and financial instability.
The South American country recorded positive growth in the first half of 2022. According to the latest report by the National Institute of Statistics and Census, gross domestic product (GDP) grew 6.2 percent year-on-year in the first five months of the year.
Economic growth was accompanied by record exports, with the country invoicing shipments of over 44 billion U.S. dollars in the first half of the year. Meanwhile, imports totaled over 41 billion dollars in the same period, driven by fuel purchases, according to Argentina’s Foreign Ministry.
In general, Argentina’s trade balance during the first six months of the year showed a surplus of 3 billion dollars.
“We have seen some variables that are starting to adjust correctly, but we have other problems such as high inflation,” Argentine economist Hernan Bergstein told Xinhua.
Argentina’s accumulated inflation was 36.2 percent in the first half of the year, with an average monthly rate in price hikes of 5 percent, while the price of basic goods and services is projected to increase about 76 percent by the end of the year, according to the Central Bank of Argentina.
The current scenario of domestic and global inflation, along with Argentina’s heavy debt burden and other factors have weakened the Argentine peso, said Bergstein, who teaches economics at the University of Buenos Aires, National University of Quilmes and National University of Lanus.
Especially on the nation’s black market, the unofficial Argentine peso devalued nearly 12 percent against the U.S. dollar in the first half of the year compared to the official exchange rate, which has remained steady thanks to strict currency control measures, he added.
The drop of the parallel exchange rate pushes the difference with the official exchange rate to 137 percent, while the gap has been around or beyond 125 percent for eight days, which is the longest streak since hyperinflation crippled Argentina from 1989 to 1990, the Buenos Aires Times reported on Wednesday, citing local broker Portfolio Person Inversiones.
The government and Central Bank of Argentina are taking steps to stabilize the situation, Bergstein noted, including allowing foreign visitors to sell dollars at a favorable rate through banks or official exchange houses, as opposed to the black market, so these dollars can “formally enter the country.”
The government has also decided to speed up the construction of the Nestor Kirchner gas pipeline, which will expand the capacity of Argentina’s gas distribution system by up to 25 percent, he said, calling it one of the most effective policies to reduce reliance on energy imports.
Bergstein believes Argentina’s main economic challenge is “to set medium- and long-term goals” that will not only send good signals to the markets, but also build the consensus and political cohesion needed to carry them out. These goals include bolstering bilateral ties with China and strengthening the Southern Common Market (Mercosur) trade bloc.
“Argentina has energy, food, marine abundance, academic training and the potential to boost its industry, as well as opportunities for foreign investment,” Bergstein said, noting Argentina should strengthen cooperation with China in all of those aspects.