The country goes to the polls on Sunday in a three-way race between shock libertarian front-runner Javier Milei, Peronist economy minister Sergio Massa and conservative Patricia Bullrich, with voters angry amid a harsh cost-of-living crisis.

"It is an economy that is in intensive care," Miguel Kiguel, a former undersecretary of finance at the Economy Ministry in the 1990s, told Reuters. "The main challenge is to get Argentina out of stagnation, but to do that you have to lower inflation."

INFLATION

Argentina's inflation rate hit 138% annually in September and is still rising, with prices climbing above 12% the two most recent months. J.P. Morgan has estimated inflation will end 2023 at 210%, while a central bank poll of analysts forecast 180%.

Fernando Morra, a former vice minister of economy under the current government, said the risk was that prices could accelerate further, leading to a similar bout of hyperinflation the country saw in the 1980s, when prices changed daily.

"This type of inflation is unstable and makes stabilization much more urgent. It is very difficult to control inflation at these levels," he said.

In a bid to tamp down inflation Argentina's central bank has hiked the benchmark interest rate to 133%, which encourages saving in pesos, but hurts access to credit and economic growth.

PESO CONTROLS

Argentina's peso currency has been shackled by capital controls since a market crash in 2019, which has led to an unwieldy array of exchange rates, where dollars trade for over twice the price of the official 350 pesos per dollar level.

Popular unofficial exchange rates include the "blue" dollar, the MEP, and blue-chip swap, though demand for dollars through parallel channels has over time spawned dozens of different rates including a "Coldplay dollar" and "Malbec dollar".

Two of the three top presidential candidates, Milei and Bullrich, have pledged to quickly undo capital controls if they are elected. Analysts expect this will lead to a sharp devaluation of the official exchange rate.

Milei wants to ditch the peso completely and dollarize the economy, while Bullrich says she favors a dual peso-dollar system.

CENTRAL BANK RESERVES

Argentina's central bank reserves of foreign currency are near their lowest level since 2016 and in net terms widely seen by analysts to be in negative territory after a major drought hit exports of key cash crops soy, corn, and wheat.

The low reserves threaten the country's ability to repay debts to major creditor the International Monetary Fund (IMF) and private bondholders, as well as cover key imports.

The government has agreed an extended currency swap with China to help cover some of its costs, and had to delay some payments to key trade partners such as Brazil.

RECESSION

Latin America's third largest economy is on track to shrink 2.8% this year, according to the latest central bank analyst survey, partly due to the impact of the recent drought that cut the corn and soy crops in half.

Along with triple-digit inflation, that is likely to sharpen poverty levels with two-fifths of people already living under the poverty line as salaries and savings are eroded.

"This is an economy that has not grown in real terms. What we call per capita income, let's say, is lower than what it was 15 years ago or almost 20 years ago," said Kiguel.

SILVER LININGS?

Argentina, rich in grains, shale gas and lithium, could see a boost next year as better rains help the harvest, a new gas pipeline trims reliance on costly imports, and demand rises for the lithium needed for electric vehicle batteries.

"There are three assets that Argentina has and if we could value them in the coming years, they will give us a development platform that can change the face of the economic situation we have at this moment," said Morra.

"There is an opportunity, though obviously we could miss it. We are world champions at missing opportunities."