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Economic growth is projected to rebound strongly in 2017 and 2018 as recent reforms gain traction and exports strengthen. Investment will pick up, supported by an improving business climate and infrastructure investment. Inflation remains high, but will decrease in line with the central bank’s target, as monetary policy remains restrictive and the effect of administrative price increases and the depreciation of the peso are wearing off. Stronger growth will gradually reduce unemployment.
Monetary policy will remain restrictive to bring down double-digit inflation, and fiscal policy will need to gradually tighten to ensure fiscal sustainability. Productivity and incomes would be boosted by structural reforms in product and labour markets. A comprehensive tax reform is needed to reduce distortions and improve fairness. Stronger efforts to reduce inequalities in access to quality education and to curb labour market informality are needed to make growth more inclusive.
The economy became increasingly isolated as trade barriers were erected in past years. To restore Argentina’s position in global markets and value chains, the authorities plan to reduce trade barriers gradually. Improving active labour market policies and training can help workers to adjust to a changing economy.