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2017 OECD Economic Surveys: Argentina 2017

Multi-dimensional Economic Survey

image of OECD Economic Surveys: Argentina 2017

Following years of unsustainable economic policies, Argentina has undertaken a bold turnaround in policies, which has helped to stabilise the economy and avoid another crisis. Building on this reform progress should help lay the foundations to raise the material living standards and well-being of all Argentinians, including the most vulnerable. This Survey discusses the challenges ahead and the policy options to address these challenges. Improvements in the areas of regulation on product markets, labour markets, competition, taxes, infrastructure, education, trade policy and financial markets would strenghten investment and productivity, which are the basis for sustainable income gains. Some of these reforms will involve adjustment costs as jobs will be lost in some firms and sectors and created in others, but well-designed policies can protect the poor and vulnerable from the burden of adjustment. A current focus on strengthening the social safety net and efforts to improve the quality of education are part of such policies, as is labour market support for affected workers. The benefits of stronger growth will depend on improving the distribution of income, which is currently very unequal and leaves one third of the population in poverty, with more at risk of falling into poverty. Efforts are also underway to reduce inequalities in the access to quality education. Public transfers to reduce inequality and poverty will continue to play an important role, together with stronger efforts to curb labour market informality.

SPECIAL FEATURES: PRODUCTIVITY; INCLUSIVE GROWTH

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Making growth more inclusive in Argentina

Commodity-led growth and strengthened social policies reversed the sharp increase in poverty that took place in the aftermath of the 2001 economic crisis. Well-being and living conditions further improved during the first decade of the millennium. However, between 2011 and 2015, increasingly inconsistent economic policies led to zero growth and threatened gains in well-being as well as additional reductions in poverty and inequality. Poverty still affects one-third of the population and eliminating it remains the priority. Besides that, one out of five Argentinians have moved out of poverty but were unable to join the middle class. This emerging socio-economic group faces substantial vulnerabilities, such as low labour income, insufficient skills, informal employment and poor access to quality public services, which put them at risk of falling into poverty. The situation requires embarking on a second generation of social policies that combine long-term poverty alleviation programmes with further support for these citizens to sustain poverty reduction over time and develop human capital. This chapter discusses a comprehensive policy package that would rebuild the social contract in Argentina. This includes improving the efficiency, targeting and progressivity of transfers and taxes, strengthening public services across regions, increasing education quality and providing incentives to promote better quality jobs, particularly by lowering labour costs, to protect the vulnerable and contribute to sustainable inclusive growth.

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