Argentina: comparisons with 2001/02

One major difference between Argentina’s current crisis and the historic 2001/02 episode is that the hit to private sector balance sheets should be smaller. So even though the coronavirus will cause a steep contraction in GDP this year, we don’t expect a fall akin to the double-digit drop in 2002. That said, a striking similarity with 2001/02 is that bondholders will probably need to stomach large haircuts again, with recovery rates of around 30% looking increasingly likely.