The International Monetary Fund (IMF) has worsened Argentina’s growth forecasts for this year. The July update of the World Outlook Report (WEO), presented this Tuesday in Washington, predicts a fall in Argentine GDP of 3.5%, seven-tenths more than the April projection. At the same time, it foresees a rebound of 5% in 2024. As for inflation, it anticipates a slowdown from 211% recorded in 2023 to 140% in December.
The IMF’s analysis for Argentina highlights the success of the fiscal and monetary adjustment undertaken by the far-right Javier Milei to combat the rise in the CPI. “Inflation has been falling very significantly in Argentina,” said Pierre-Olivier Gourinchas, in charge of disseminating the report at a press conference. “It is still a high figure, but sequential inflation is falling quite quickly thanks to very strong measures that have been implemented by the country’s authorities. Now, the key component of the measures that have been implemented is the fiscal aspect,” he said. The flip side of the war against inflation is the recession, even deeper than the IMF expected just three months ago. The adjustment, warned the IMF’s technicians, had an impact on activity because “there is less public spending and monetary conditions have been tightened.”
This month, Milei’s government celebrated the approval of the so-called Ley Bases, designed to reduce the State to a minimum and promote the private sector. At the same time, it created a new ministry that will be in charge of eliminating hundreds of laws and regulations that Milei considers harmful to the economy. He put Federico Sturzenegger in charge, former director of the Central Bank during the administration of the liberal Mauricio Macri (2015-2019) and drafter of a good part of the deregulation law approved by Congress. The immediate results were not as expected. The government has had problems since last week to contain the rise of the dollar in the informal market and the country risk, which is the differential that Argentina pays for its debt with respect to the United States, has shot up to 1,600 points, its highest value in four months.
The IMF has just approved the eighth review of the program it maintains with Argentina and released the transfer of 800 million dollars that the Casa Rosada will use to pay through another window the debt to the multilateral. The intention of the far-right government is to negotiate a new agreement that allows the disbursement of some 15 billion dollars, the figure that the Minister of Economy, Luis Caputo, considers necessary to release the current exchange restrictions, the so-called “cepo”.
The Fund, however, is optimistic about the Argentine economy in 2025. It expects that after hitting bottom this year, the recession will reverse and GDP will rebound by 5%, the highest in the region, “as confidence returns and real wages grow.” “Towards the end of the year, we expect the impact of the fiscal contraction to diminish, confidence to be restored and, basically, the national economy to recover,” said Petya Koeva, deputy director of the Fund’s Research Department. The IMF Board warned in the Argentine chapter of the report that “maintaining solid progress requires improving the quality of the fiscal adjustment, initiating steps towards an improved monetary and exchange rate policy framework, and implementing the structural agenda,” the IMF Board warned in the Argentine chapter of the report.
Correction for Brazil
In the case of Brazil, Latin America’s largest economy, the IMF also revised Brazil’s positive growth slightly downwards, from 2% to 2.1%, due to the short-term impact of the floods in the south of the country. “However, Brazil’s growth has been revised upwards in 2025 to reflect post-flood reconstruction and favourable structural factors (for example, the acceleration of hydrocarbon production),” the report says. The IMF forecasts that the Brazilian economy will grow by 2.5% in 2025.
Subscribe here to the EL PAÍS América newsletter and receive all the key information on current affairs in the region.
#IMF #warns #Argentine #economy #fall #expected #year