OECD Economic Outlook, Volume 2025 Issue 2

Argentina

Real GDP growth is projected to be 4.2% in 2025 and 3% in 2026, before picking up again to 3.9% in 2027. Growth will be driven by investment and exports, due to an increasingly business-friendly environment, less burdensome regulations, and a buoyant energy and mining sector. Inflation has been declining and fiscal deficits have been closed, but growth has weakened recently and pressures on the exchange rate have illustrated remaining macroeconomic vulnerabilities and political uncertainty.

Expenditure restraint and higher tax revenues, supported by the economic recovery, have improved fiscal outcomes, but further reforms will be needed to sustain fiscal prudence while boosting potential growth. Reducing tax complexity and broadening tax bases would help to improve fiscal outcomes in the medium‑term. Monetary policy should focus on keeping inflation on a declining path. Broad-based growth will hinge on further regulatory reform to strengthen domestic competition and promote international trade, while also expanding the offer of technical and vocational education.

Economic activity has slowed amid uncertainty

Following three quarters of strong growth, real GDP in the second quarter of 2025 declined 0.1% relative to the previous quarter, as domestic demand fell by 0.7%. The main monthly activity indicator decreased for three consecutive months before picking up slightly in August. Consumer confidence remains low, and supermarket sales have declined consistently since April. Despite softer growth, the labour market remains resilient. Real wages continue to recover, though the pace of this recovery has slowed. Despite exchange rate depreciation, annual inflation has picked up only slightly and remained at 31.8% in September.

Argentina

1. The mining industrial production index covers mining of metallic and non-metallic minerals, extraction of natural gas and crude oil, and support services for the extraction of crude oil and natural gas.

Source: INDEC.

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Argentina: Demand, output and prices

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The economic impact of the 10% tariff on Argentina’s exports to the United States is expected to remain contained as the U.S. accounts for only 9% of Argentina’s exports. The currency has come under pressure recently, prompting currency interventions and slowing the accumulation of international reserves. A recently announced USD 20 billion currency swap with the US Treasury is expected to strengthen Argentina’s Central Bank reserves.

Tight monetary and fiscal policies should be maintained

Market-determined interest rates have risen sharply in recent months amid tight control of monetary aggregates. Monetary policy should remain restrictive to lower inflation in a durable manner. The domestic currency is expected to remain volatile amid residual policy uncertainty, but the pass-through from depreciation to inflation appears to have weakened. The government budget is expected to post surpluses in 2025-2027, despite new expenditure measures initiated by the legislative branch and the temporary suspension of agricultural export taxes.

The economic recovery is set to continue

Real GDP is expected to grow by 4.2% in 2025, 3.0% in 2026, and 3.9% in 2027. Growth will be mostly driven by investment, thanks to significant opportunities in the mining and energy sectors, an incentive regime for large investment projects and progress in reducing administrative burdens. Lower export taxes for some agricultural products will continue to support exports. Consumption will lose momentum due to slower real wage growth and high interest rates. Private consumption and investment growth will strengthen in 2027 after a gradual improvement in financial conditions. Lower import tariffs and easier import procedures will support import growth. Balanced public accounts and high real interest rates will contain demand pressures, allowing inflation to continue falling to a projected annual average rate of 41.7% in 2025, 17.6% in 2026 and 10.0% in 2027. Despite significant progress, macroeconomic vulnerabilities remain and expose the economy to potential swings in confidence, as evidenced by recent exchange rate volatility. Bouts of volatility could return amid low currency reserves, still high inflation and the need for further structural reforms across a wide range of policy areas. A successful continuation of the current reform momentum, however, could lead to stronger than expected improvements in productivity, competitiveness and fiscal sustainability.

Building on recent efforts to improve regulation would boost productivity

Rebuilding international reserves should be a key priority to address remaining vulnerabilities and continue the stabilisation of the economy. Furthermore, a comprehensive tax reform, eliminating the most distortive taxes, reducing tax complexity and broadening tax bases, would help to improve the fiscal position in a sustainable manner while reducing distortions that hold back income growth. Over the last two years regulatory processes have been greatly simplified, and entry barriers have been lowered across many sectors. Further streamlining of business regulations has significant potential to raise productivity, especially by reducing entry barriers in services sectors and lowering administrative burdens for new firms. Continuing to adjust non-tariff trade barriers, including unwarranted technical regulations, can further ease access to foreign inputs. Creating a new independent, well-funded Competition Authority, as set forth in the competition law, is key to strengthen competition, and the selection of senior staff is currently ongoing. Expanding the supply of technical and vocational education, while cooperating with the private sector in the design of training curricula, would enhance workforce skills and facilitate additional productivity improvements.