Restoring economic growth in Argentina

Despite its economic collapse in 2001-02, the Argentine economy has elements of fundamental strength that should enable it to return to growth. Argentina's growth performance was strong in most of the 1990s after privatization, deregulation, and other market-oriented reforms. The default and devaluation at the end of 2001, and depression of 2002 with an 11 percent decline of GDP, comprised Argentina's worst economic collapse on record. The one ray of light was that Argentina avoided hyperinflation, which many had feared would follow the plunge of the peso's value from parity to the dollar to as low as 3.8 per dollar. The severe depression in domestic demand, the bank deposit freeze, and an incomes policy averting wage increases in response to the devaluation (in contrast to historical experience), all helped avoid hyperinflation, but the outcome was also consistent with the international pattern in recent years, whereby domestic price increases in emerging market economies following severe devaluations, have been surprisingly modest. The report reviews the principal causes of the crisis vs. the economy in 2002, and recent trends, which for 2003, suggest real growth of 4 to 5 percent, and inflation of 15 to 20 percent, or lower. It then analyzes how to avoid inflation, whose proximate remaining risks include the need to increase frozen utility prices, and pressures for increases in public sector wages. On refurbishing the banking system, it is stipulated that until asset values rise enough to turn net worth positive in economic terms, the Banking system will tend to refrain from making new loans, curbing investment needed for growth. The Banking system will also need to be strengthened, through the restructuring and/or privatization of the weakest banks. Most importantly, the report specifies the need to maintain the social safety net, to achieve fiscal consolidation, crucial to restoring long-term growth, and, policies to attract foreign direct investment, and to implement labor market reforms, and strengthen the institutional framework
http://documents.worldbank.org/curated/en/805501468769277647/Restoring-economic-growth-in-Argentina