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Argentina's Imaginary Miracle

The oldest statistical trick in the book is to label as growth what is really just a rebound after a massive output dip. That is exactly what has happened in Argentina, where the rapid economic rebound in 2021 came as no surprise and does not look especially healthy or sustainable.

SANTIAGO/BUENOS AIRES – Argentina has achieved a miracle in its economic response to the COVID-19 crisis, the Nobel laureate economist Joseph E. Stiglitz claimed in a recent commentary. The white knight in this saga, according to Stiglitz, is President Alberto Fernández, who inherited a mess on taking office in late 2019 and introduced policies that spurred high growth and a rebound in employment and investment. Stronger activity, coupled with higher and more progressive tax rates and a debt exchange in 2020, in turn improved the public finances.

It certainly does look miraculous. Unfortunately, the data tell a different story.

The oldest statistical trick in the book – one for which progressive Latin American economists have often and correctly chastised their conservative counterparts – is to label as growth what is just a rebound from a massive output dip. That is exactly what has happened in Argentina. In 2020, the economy contracted by a whopping 10%, the second-largest slump in the region, after Peru. Argentina’s rapid recovery in 2021 – like that of most of its neighbors – thus came as no surprise, but output has yet to return to pre-pandemic levels.

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