In the past month, Argentina has been plagued with protests and strikes. On 1 April, tens of thousands of people took to the streets in support of President Mauricio Macri and the “new” economic policies he has undertaken since being in office. A week later, the first national strike in 16 months was staged – this time against current policies. This general strike, inspired by the opposition (Peronists), seemed to draw only lukewarm support.  

Impact on country risk

Since President Mauricio Macri took office in 2015, the government has swiftly changed previous economic policies to turn around an economy on the brink of collapse. The reforms have given diverse results. On the one hand, access to financial markets has been restored, leading to a quickly rising external debt (estimated at 35% of GDP end 2016 or almost 265% of current account receipts). Foreign exchange reserves also doubled in the past 2 years covering almost 6 months of import in March 2017 (the norm being 3). Investment is also being boosted after years of underinvestment and the economy is expected to emerge from recession in 2017 (with an economic growth of 2.7%). On the other hand, the reforms led to difficulties in the short term as inflation soared (estimated at 39.4% end 2016), high interest rates restricted the access to credit, while the economy went briefly into recession (-1.8% in 2016). Also the current account deficit has been widening to an expected -3% of GDP in 2017. Not surprisingly, the current policies have been received with mixed feelings. Nevertheless, it is remarkable how popular Macri remains despite harsh reforms – the government’s popularity rating remains around 50%. The relatively high ratings can be partly explained by the unpopularity of the previous president, Cristina Fernández. She remains the most visible leader of the Peronists, notwithstanding multiple corruption investigations. That being said, crucial midterm elections in October (where Macri’s coalition might win a legislative majority), will provide a more decisive referendum on the perception of the current policies. Moreover, if his coalition wins more seats, it is likely that the government will push through further reforms, e.g. to tackle the fiscal largesse (a fiscal deficit of 6.1% of GDP is expected in 2017 while public debt stood at 51% of GDP end 2016).

Analyst: Jolyn Debuysscher, j.debuysscher@credendo.com