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October 4, 2021

The Week at a Glance

Argentina: Transitory Needs and Permanent Problems

BY Alejandro Giacoia, Andrés Borenstein, Miguel A. Kiguel, Isaías Marini

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This week the government announced a plan for 55-year-old women and 60-year-old men to obtain their retirement if they are unemployed and meet a contribution requirement. The logic of the measure is that it is not easy for this group reintegrating into the labor market, much more after the shock of the pandemic. But this problem is not new, and the idea arises coincidentally after an electoral defeat and 45 days before the next election. The new norm (which comes out by decree) seems to be very related to a political necessity. This is one of many decisions made after the September 12 defeat that will undoubtedly impact the 2021 fiscal numbers.

The Economy Will Grow at Least 8% This Year

-Economic activity advanced 0.8% in July, without seasonality, hand in hand with new re-openings, although it is still below 2019 -Industry and construction lose momentum, and the protagonists of the coming months will be the services sector; the first estimate of our nowcast for August points to a decrease of between 0.1% and 0.4% compared to July -We expect GDP in 2021 to end up growing 8% or somewhat more, leaving a statistical carryover close to 1 p.p. for 2022, which we project at 2.5%, although there are downside risks

Dollar Shortage

-In September, the CB’s intervention was negative by US$ 950 million, cutting a streak of 9 consecutive months of net purchases -The low accumulation of net international reserves given the all-time high level of the soybean price is striking, although it has an explanation -The theory says that if you want to keep a fixed FX policy together with an expansionary monetary policy, what you will end up sacrificing is the level of international reserves

Poverty Is Structural and Will Take a Long Time to Go Down

-Poverty fell (marginally) while indigence rose, standing at 40.6% and 10.7%, respectively. Poverty in children is 54.3% -The percentage of indigents as a share of the poor reached 26%, the highest since INDEC became credible again -An improvement in the targeting of spending can lower poverty, but it will hardly make it go under 30% without a comprehensive economic program.

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