The International Monetary Fund has lowered its prediction for Argentina’s economic growth, expecting the country’s second-largest economy to decline for two years in a row. This downward revision comes as President Javier Milei advocates for a substantial change in policies.
According to the latest estimates from the International Monetary Fund (IMF), Argentina’s economy is expected to contract by 2.8 percent this year due to high inflation. This comes after a decline of 1.1 percent in 2023. The IMF had previously predicted a growth rate of 2.8 percent for Argentina in 2024.
After assuming office in December, Milei has removed government subsidies and price controls, implemented a currency devaluation of 54 percent, and presented strategies to improve financial stability. As a result, a large number of people gathered in Buenos Aires last Wednesday in response to unions’ call for a 12-hour strike to demonstrate against Milei’s economic measures.
The government’s efforts to reduce expenses are essential in order to control inflation, which the IMF predicts will decrease to approximately 150 percent annually by December.
IMF’s chief economist, Pierre-Olivier Gourinchas, stated during a press conference in Johannesburg, South Africa, that the fiscal adjustment being made is significant. He explained that the main reason for inflation is excessive monetary financing, therefore it is crucial for the government to consolidate and stabilize their accounts.
However, Milei is encountering challenges in carrying out his goal of eliminating the primary budget deficit this year. In order to gain approval for his package of crucial reforms in Congress, he had to abandon numerous proposed actions, such as raising taxes on exports and privatizing the oil company YPF.
According to a recent survey conducted by Argentina’s central bank, analysts predict that the economy will decline by 2.6 percent in 2024. Earlier in November, the Institute of International Finance anticipated a contraction of 1.3 percent for this year.
As relative prices readjust and inflation increases in the near future, Argentina’s economic decline will negatively impact the growth of Latin America in 2024. According to IMF economists, the region is expected to only grow by 1.9 percent, compared to the 2.5 percent pace seen last year. However, Argentina may experience a return to growth in 2025, with the IMF projecting a five percent expansion.
The next paragraph will be paraphrased in English language by Maria Eloisa Capurro, Bloomberg.
