Analysis of the global challenges and economic situation in Argentina Essay

Analysis of the global challenges and economic situation in Argentina - Essay Example Inflation As the economic activity in Argentina has expanded in 2010, there was a sudden increase in money supply which has resulted in increasing the consumer prices. According to the Central Bank of Argentina, the YoY increase in money supply during Feb 2011 increased by nearly 27.8%. This resulted in increased inflation figures for Argentina. As a result, the exporters of the country, mainly in the manufacturing sector are losing their competitive position in the market, driven by increase in domestic costs and relative stability in the exchange rates (Ken 2011). â€Å"Beyond entrenched high inflation, the erosion of external competitiveness during 2010-2011 is another thorny issue the next administration will have to face, which, if not properly handled, could end up generating a crash- rather than soft-landing of the economy in 2012† - Alberto Ramos, Economist, Goldman Sachs, Mar 2011. As a result, Argentina’s middle class suffered most due to high inflation, there by affecting mobile phones, cable, petrol, health insurance premiums etc. in the month of Jan 2011 According to Argentina’s national statistics agency Indec, the country’s annual inflation in was 10% by the end of Feb 2011 and 10.6% by Jan 2011. Inflation was mainly supported by increase in prices of tourism services, clothing and increase in prices of food and beverages. Also, according to EIU, the inflation was supported by the government’s intervention in the agricultural sector which has resulted in the reduced production of important foodstuffs such as beef. Many local consulting companies in Argentina differ on these official inflation figures are they estimated the country’s inflation... This paper provides a thorough analysis of the recent economic developments in Argentina. The essay aims to analyse the current economic environment in Argentina, including GDP, Inflation, Industrial Production Index, agriculture, the country’s debt situation, foreign exchange rate, unemployment, Consumer ABS, Central Government revenue and expenditures. Argentina’s GDP grew by 9.2% year-on-year through the quarter ended Dec 2010. The economy’s strong performance was driven by domestic demand, with private consumption rising 11.5% year on year, up from 8.9% in the previous quarter. As the economic activity in Argentina has expanded in 2010, there was a sudden increase in money supply which has resulted in increasing the consumer prices. According to the Central Bank of Argentina, the YoY increase in money supply during Feb 2011 increased by nearly 27.8%. The country aims to impose trade barriers due to high imports. In 2010, Argentina reported 46% rise in its imports, to reach $56.4 billion. This was mainly due to heavy imports of intermediate goods used by automobile industry and capital goods industry. Argentina has stepped up trade barriers in terms of import duties or the range of products. The government should remove growth obstacles by reducing import and export tariffs and moderating its stringent price control measures. This would result in increasing the trade activity with other countries. It would also result in increasing the investors’ confidence which would result in increased FDI and FII in the country