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OECD

OECD Economics

2017 MULTIDIMENSIONAL ECONOMIC

SURVEY OF ARGENTINA

Towards a more prosperous and

inclusive Argentina

Buenos Aires, July 2017

2

Main messages

• Following years of unsustainable economic policies,

Argentina has undertaken ambitious reforms.

• But the work is far from being finished. Many

challenges still lie ahead.

3

Argentina has lost grounds in terms of incomes

Source: OECD calculations based on Bolt and Van Zanden (2014) (see http://www.ggdc.net/maddison/maddison-project/data.htm).

Poverty and inequality have fallen but

remain very high

Source: Encuesta Permanente de Hogares (EPH) 2016 and OECD Income Distribution Database (2016)

5

Significant macroeconomic imbalances have built up:

Fiscal deficit

Source: CEIC, Datastream, Ministerio de Hacienda

6

Significant macroeconomic imbalances have built up:

Inflation

1. Based on the Congress CPI, only for the greater Buenos Aires area.

Source: INDEC, Diputados del Congreso Indice Nacional

7

Growth was not sustainable

Source: INDEC

8

Further reforms will bring susbtantial benefits

Source: OECD computations.

9

First challenge:

Ensuring sound and sustainable

macroeconomics

10

Bringing down inflation will be challenging

Source: BCRA, CEIC.

11

Public expenditure and taxes are high

Source: IMF World Economic Outlook database, October 2016.

12

There is scope for reducing expenditures

Los subsidios están siendo

reducidos pero todavía

representan el 2.2% del PIB.

Source: OECD calculations, Ministerio de Hacienda, OECD/IDB/CIAT (2016), Taxing Wages and Taxing Wages in Latin America and the Caribbean, OECD Publishing, Paris.

13

The tax system is not very efficient

Income threshold where single taxpayers start paying income tax, as a multiple of the average wage

1. For India, the average worker income is for the organised manufacturing sector as reported in the Annual Survey of Industries.

Source: OECD calculations for Argentina (based on 2016 data), Brazil, China, India, Indonesia and South Africa; and OECD Taxing Wages 2016 for the rest of the countries;

OECD Government at a glance (2016).

14

Key recommendations

Macroeconomic policies

Reinforce the independence of the Central Bank by limiting the possibilities for dismissal of the governor.

Simplify the Central Bank’s mandate, prioritising price stability.

Continue to to pursue planned fiscal targets.

Phase out energy subsidies, rationalise public employment and achieve further cost savings in state-owned enterprises.

Undertake a revenue-neutral tax reform, including

- Lowering the income threshold where taxpayers start paying personal income taxes and ensuring a progressive rate schedule.

- Introducing progressivity into social security contributions.

- Phasing out the provincial turnover tax and financial transaction tax.

15

Second challenge:

Raising productivity and living standards

16

Investment and productivity growth have been low

Source: OECD and CEP (Centro de Estudios de la Productividad).

17

Barriers to entrepreneurship are high and regulatory

procedures are complex

Source: OECD Product market regulation database

18

More young firms and start-ups are needed

Source: OECD computations based on World Bank Enterprise survey database.

19

Few companies are headed by female managers

Source: World Bank Enterprise survey database.

20

Argentina is only sparsely integrated into the global

economy

Source: IMF International Financial Statistics; OECD Economic Outlook 100 database;

21

Better training can help to find new jobs

Source: World Bank ASPIRE database and OECD Stats. Data pertain to 2014 or latest available year.

22

Key recommendations

Strengthening productivity and investment

Simplify administrative procedures to start a company.

Ensure that the competition authority has autonomy and adequate resources.

Lower import tariffs and further reduce the application of non-automatic import licenses.

Protect workers with unemployment insurance and training rather than strict labour regulations.

Develop the vocational education system

Better align curriculums with labour market needs.

Promote gender equity.

23

Third challenge:

Reducing poverty and inequality

24

Transfer programmes reduce poverty and inequality

Source: OECD estimates.

Half the population is poor or at risk of falling into

poverty, particularly children

Source: Encuesta Permanente de Hogares (EPH) 2016 ; OECD Income Distribution Database (2016)

0

5

10

15

20

25

30

Argentina LAC 9 OECD

% of population Relative poverty by age group

Children (<18) Youths (18-25) Adults (26-65) Elderly (>65)

Poor 31%

At risk of falling into poverty 20%

Middle Class 44%

Affluent 6%

26

The sustainability of the pension system is at risk

Source: OECD Pensions at a glance, 2016.

Pension levels are high relative to working-age wages

0

20

40

60

80

100

Poor At risk of falling

into poverty

Middle Class

Affluent

% Employment, 2016

Creating quality jobs is crucial for eliminating poverty

in a sustainable manner

Source: Encuesta Permanente de Hogares (EPH) 2016 and CEDLAC (2016).

0

5

10

15

20

25

30

35

40

45

GT

M

HN

D

BR

A

PE

R

NIC

ME

X

PR

Y

CO

L

SLV

BO

L

DO

M

PA

N

CR

I

UR

Y

EC

U

AR

G

CH

L

Percentage point Gap in employment among adult and youth population, 2014

0

10

20

30

40

50

Poor At riskof falling

into poverty

Middle Class

Affluent

% of employment

Informality, 2016

28

Female labour participation is low

Source: OECDstat, 2015, EPH (INDEC), 2016 for Argentina.

Improving access, quality and equity in the

education system is a priority

0

20

40

60

80

100

ISR

DE

U

AU

S

FR

A

OE

CD

CH

L

ITA

AR

G

CO

L

ES

P

BR

A

TU

R

ME

X

% Education secondary (population aged 25-34)

0

10

20

30

40

50

AU

S

ISR

ES

P

OE

CD

JPN

DE

U

CO

L

CH

L

TU

R

ME

X

ITA

AR

G

% Education tertiary (population aged 25-34)

Source : UNESCO (2016), OECD PISA (2016), OECD Education at a Glance (2016) y EPH 2016 (INDEC).

0

10

20

30

40

50

60

UR

Y

ME

X

BR

A

LAC

CR

I

CO

L

AR

G

ES

P

ISL

ITA

PR

T

CH

L

HU

N

ES

T

EU

GB

R

NO

R

BE

L

DE

U

FR

A

LUX

FIN

NLD

GR

C

DN

K

AU

T

SW

E

IRL

SV

K

CZ

E

PO

L

CH

E

SV

N

% Young people (18- 24 aged) who did not finish the secondary, 2014

Improving skills brings short-term and long-term

benefits

0

20

40

60

80

FRA ESP ITA CRI AUT OECD MEX LAC DEU COL ISR ARG TUR JAP

% Percentage of firms identifying difficulty in filling jobs , 2016

Source: ManPower (2016), UNESCO (2016), y EPH 2016 (INDEC).

0

10

20

30

40

50

PE

R

BR

A

CA

N

CO

L

JPN

AR

G

GR

C

ES

P

ME

X

FR

A

DE

U

LAC

ISR

CH

L

TU

R

CR

I

OE

CD

SW

E

PO

L

AU

S

ITA

AU

T

CH

E

FIN

NLD

% Percentage of secondary students enrolled in vocational education 2015

31

Key recommendations

Reducing inequalities

Integrate existing social protection programmes and allow them to share registries and targeting tools.

Index pension benefits to consumer prices and align retirement ages for women to those for men.

Merge teacher training institutions and strengthen their quality standards, governance, accounting requirements and transparency.

Strengthen mechanisms to identify and support students at risk of dropping out through tutoring and individualised support..

Expand early childhood education, promote flexible working time arrangements and extend paternity leave.

Lower social security contributions temporarily for low-paid workers whose jobs are brought into the formal sector.

Scale up training, employment services, and simplify administrative procedures to start a company

Enforce formalisation and compliance with more labour inspections.

For more information…

OECD

OECD Economics

Disclaimers:

The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without

prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers

and boundaries and to the name of any territory, city or area.

32

http://www.oecd.org/eco/surveys/economic-survey-argentina.htm

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