5 key risks facing Argentina from 2023, according to the World Economic Forum

Inflation, debt crisis and proliferation of illegal economic activities are some of the main risks for Argentina, according to a report by the World Economic Forum (WEF).

According to the Global Risk Perceptions survey, produced in conjunction with Marsh McLennan and Zurich Insurance Group, “Globalized capital flows in recent decades have increased the exposure of emerging and developing markets to rising interest rates, especially those with a high proportion of dollar-denominated debt, such as Argentina.”

In addition, it warned about “social and political polarization.” Referring to this year’s electoral process both in Argentina and in other G20 countries, it argued that “the election of less centrist leaders and the adoption of more ‘extreme’ policies in the economic superpowers can break alliances, limit global collaboration and lead to more volatile dynamics.

#1. RAPID AND/OR SUSTAINED INFLATION

Although the report considered that “inflation management is a global concern,” it pointed out that there are cases such as Argentina in which the range is higher. “It stood out as one of the top five risks in the next two years in 89 of the countries surveyed. A significant number increased from 2021,” it said.

“It was classified as the main threat in several G20 countries, including Brazil, South Korea and Mexico, although inflationary pressures have affected both developed countries and developing economies,” it analyzed. In this sense, it pointed out that “inflation rates increased above 80% in Argentina and Turkey.”

#2. DEBT CRISIS

According to the report, Argentina is among the largest emerging markets with the highest risk of default.

Countries such as Egypt, Ghana, Kenya, Tunisia, Pakistan and Turkey are also on that list.

“The private sector could be encouraged to participate in debt restructuring through mechanisms, such as the issuance of new bonds with stronger legal protections, loss restitution commitments, and value recovery instruments,” it suggested.

#3. PROLIFERATION OF ILLEGAL ECONOMIC ACTIVITIES

Referring to this point, it warned that “they undermine economic advancement and growth due to organized crime or the illegal activities of companies.”

Furthermore, it noted that it includes, but is not limited to, “illicit financial flows (for example, tax evasion); and illicit trade and trafficking”, such as “counterfeiting, trafficking in human beings, trade in wild fauna and flora”.

#4. STATE COLLAPSE

The survey points to the risk of a state collapse due to “the erosion of institutions and the rule of law, internal civil unrest and military coups, or the effects of serious regional or global instability.”

Chile and Colombia are some of the countries in the region that also have this risk, according to the report.

#5. SEVERE RAW MATERIAL SUPPLY CRISIS

The risk of having a supply crisis of raw materials includes energy, food and water.

The fifth point was registered as a localized risk and as one of the top five concerns in 34 countries, including Argentina, Switzerland, South Korea and the United Kingdom.

With information from Bloomberg