ANDThe IMF this Monday worsened its growth forecast for Argentina, to a contraction of 3.5% in 2024, and improved the average annual inflation forecast to 233%but warned of the risk of the recession prolonging “fueling social tensions.”
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The financial institution published a detailed report in which it is satisfied with President Javier Milei’s “chainsaw” plan to drastically cut state spending. but he raises some objections and asks for more tax reforms.
“Impressive progress has been made toward achieving overall fiscal balance and priority must now be given to further improving the quality of adjustment,” said Gita Gopinath, the IMF’s number two, after the agency’s executive board approved the eighth review of the credit agreement agreed with the South American country.
This approval allowed an immediate disbursement of about 800 million dollars.
Impressive progress has been made towards achieving overall fiscal balance and priority must now be given to further improving the quality of adjustment
“Efforts must continue to reform the income tax” of individuals, “rationalize subsidies and tax expenditures and strengthen public spending controls,” he adds in a statement published this Monday, in which he estimates that They will need “deeper reforms of the tax, pension and income-sharing systems.”
Furthermore, in his opinion “monetary and exchange policies must evolve to continue strengthening the disinflation process and further improve the coverage of monetary reserves.”
In the latest update, the Gross Domestic Product (GDP) growth data for this year worsens, from -2.75% expected in April to -3.5%. But a change in trend is expected during the second half of the year, “as the headwinds derived from fiscal consolidation attenuate, real wages begin to recover and investment gradually recovers.”
In general terms, the Fund is satisfied with the evolution of the economy and inflation.
The average annual price increase forecast goes from almost 250% to 232.8%, according to this latest report.
Monthly inflation drops to 4% and will decrease “even more in the medium term,” says the IMF. And it expects reserves to remain unchanged.
The risks of the economic program in Argentina
The risks of the credit program under which the South American country receives 44 billion dollars over 30 months in exchange for increasing its international reserves and reducing the fiscal deficit, “have moderated, but remain high,” warns the Fund.
The IMF estimates that Milei’s government has “firmly moved the economy away from a total crisis and hyperinflation” but the outlook is not without risks.
External conditions may become less favorable and “the recession could be prolonged, fueling social tensions and complicating the implementation of the program,” he warns.
Milei narrowly achieved Senate approval of a controversial reform package last week, but it will still have to pass the filter of the lower house.
The IMF is concerned that there will be new legislative delays “because they could undermine stabilization and recovery efforts,” but believes that “social consensus” must be sought taking into account “the fragile social and political panorama.”
And half of the population lives in poverty, thousands of people lost their jobs and inflation eats away at pensions and the purchasing power of households.
Minister of Argentina visits El Salvador to learn about the “Bukele method” against crime
In other news, The Minister of Security of Argentina, Patricia Bullrich, began a four-day visit to El Salvador this Sunday to learn about the “method” applied by President Nayib Bukele to confront gangs.
“Together against the criminals who murder massively and believed they were owners of our countries and societies,” said Bullrich on the social network .
Bullrich toured the megaprison inaugurated in 2022 with capacity for 40,000 inmates alongside the Minister of Justice and Public Security of El Salvador, Gustavo Villatoro, who “welcomed” the official “to the safest country in Latin America.”
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