The International Monetary Fund has significantly reduced its prediction for Argentina’s economic growth in 2024, forecasting a contraction of 2.8 percent, as inflation is expected to keep increasing.
The latest estimate provided by the IMF World Economic Outlook According to the report, there has been a significant decrease of 5.6 points in the multilateral lender’s previous prediction for 2024 growth. This previous forecast in October had predicted a 2.8 percent growth rate.
In the IMF report, the effects of President Javier Milei’s implemented austerity measures on the country’s persistent economic crisis were discussed.
According to the International Monetary Fund (IMF), the reason for the revision of the forecast for 2024 is Argentina’s contraction in economic growth, along with the implementation of substantial changes in economic policies aimed at regaining stability in the country’s overall economy.
In Argentina, the inflation rate is currently exceeding 210 percent per year, and prices increased by over 25 percent in the previous month alone. The poverty rate stands at over 40 percent, and slightly more than nine percent of the population is classified as extremely poor.
According to the IMF, the economy is expected to experience a consecutive year of decline as it estimates a 1.1 percent contraction in GDP for 2023.
Nevertheless, according to the experts from the Fund, there is a prediction of a recovery in the economy by 2025, with a GDP growth rate of five percent. This forecast shows an enhancement by 1.7 points compared to the October forecast.
President Javier Milei has implemented severe cost-cutting measures since assuming power in December of last year in an effort to address the continuing crisis. The leader of La Libertad Avanza party has significantly lowered the value of the country’s currency, decreased government support for fuel and transportation, and halved the number of ministries.
Milei has maintained that although these policies are causing immediate pain, the long-term benefits will make it worthwhile. However, numerous citizens are concerned that his set of deregulation and economic reform will result in a deteriorating situation for them. Recently, the new government faced its first significant protest.
The IMF issued a report cautioning that consumer prices would keep increasing in the near future, without specifying an official projection for the entire year.
The passage states that the adjustment of prices and removal of existing price controls, combined with the previous devaluation of currency and its impact on prices, are predicted to lead to a rise in inflation in the short term.
In an interview with the Wall Street Journal Milei admitted last week that it could take approximately two years for the effects of his alterations to become noticeable.
The president acknowledged the presence of a warning light that, according to them, it is challenging to sustain for longer than a year. They also declared that they do not have an alternative plan.
The IMF report has revised its growth forecast for Latin America and the Caribbean, with a 0.4 percentage point decrease to 1.9 percent. This adjustment takes into account the negative economic situation in Argentina and the efforts being made to restore stability in its macroeconomy.
According to the IMF, Argentina’s significant increase in inflation is the primary factor causing the projected inflation rate for emerging markets and developing economies in 2024 to reach 8.1 percent.
In a press conference held on Tuesday, Pierre-Olivier Gourinchas, the chief economist of the International Monetary Fund (IMF), acknowledged that their evaluation of Argentina’s future prospects has been significantly lowered. However, he emphasized that there will be a resurgence in growth in 2025, reaching approximately five percent.
Despite initial predictions of a bleak outlook, the overall situation in 2024 appears to be more promising for several countries compared to 2023. With the exception of Argentina, all the countries mentioned in the report are projected to experience economic growth this year.
In comparison to 2023, there has been progress as only four of the 30 economies mentioned in the report are expected to have experienced a decline.
In summary, the IMF has increased its prediction for global growth in 2024 to 3.1 percent. This adjustment is due to the surprising strength of major advanced and emerging market economies globally, including the United States and China. The new forecast is 0.2 percentage points higher than the previous estimation made in October.
According to Gourinchas, the world economy remains strong and capable of enduring challenges, as both inflation rates decrease consistently and growth rates remain stable.
The International Monetary Fund’s prediction for inflation in 2024 remains the same at 5.8 percent, but this figure hides a noticeable change between wealthier and less wealthy nations.
The predicted inflation rate for advanced economies in 2024 has been revised down to 2.6 percent, a decrease of 0.4 percentage points compared to October. On the other hand, emerging and developing economies are projected to experience an annual inflation rate of 8.1 percent, an increase of 0.3 percentage points.
Gourinchas stated that if we disregard Argentina, the overall global inflation rate would decrease to 4.9 percent in the current year. Additionally, he predicted that within the domestic market, consumer prices would experience an approximate increase of 150 percent throughout this calendar year.
