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The World Bank says it is still early to talk about hyperinflation in Argentina

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The World Bank predicted Tuesday that the Argentine economy will grow will drop from 4.2% to 2% next year because there will be “headwinds” and warned that although the price index in our country far exceeds the average for the region and is “a great concern”, he said there are still “It’s too early to talk about hyperinflation.”

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In a report entitled “New approaches to bridge the tax gap “, Released in Washington as part of the Annual Assembly of the World Bank and International Monetary Fund, the organization said that the economies of Latin America and the Caribbean have recovered levels of growth from before the pandemic and there is a “a certain sense of normality. However, they warn that the regional economy must be reactivated to avoid a new cycle of low growth.

The Bank estimates that the Regional GDP will grow by 3% in 2022, a higher-than-expected rate due to rising commodity prices, although the report warns of global uncertainty due to the war in Ukraine, rising interest rates in developed countries and persistent inflation affecting different countries. For the next year the region will only grow to 1.6% and 2.3% in 2024, levels that they consider “insufficient” to reduce poverty.

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As for Argentina, the report states that this year the GDP will grow by 4.2%, driven by the price of raw materials, but will drop to 2% next year due to “headwinds”.

“The general rise in commodity prices was an opportunity for regional exporters such as Argentina, Brazil, Chile, Colombia, Ecuador and Peru. However, favorable winds should turn into headwinds. Commodity prices are expected to decline by 10% next year. “ record the report.

Furthermore, he stresses, “the US Fed funding rate has already increased by 1.5 percentage points and the US Federal Reserve is about to increase it by another 2.5 percentage points. These developments, coupled with the conflict in Ukraine, weaken the G-7 economies, which, coupled with the persistent recession in China caused by the COVID-19 blockade, will reduce exports.

Moreover, they point out, political uncertainty has also increased in some countries and all this points to a reduction in growth rates towards 2023.

The Bank expects Brazil to grow by 2% this year and by 0.8% next; Uruguay 4.8% and 3.7%; Chile 1.8% and 0.8%; Colombia 7.1% and 2.1%.

The report believes that inflation in the region, barring extreme cases such as Argentina and Venezuela, is within OECD levels, 6%, but that measures are still needed to lower it.

Asked about the price index in our country, which is estimated to be close to 100% this year, William Maloney, the World Bank’s chief economist for Latin America and the Caribbean, said in a press conference that “obviously, Argentina is one of the countries in the region with an above average inflation rate, which is 6% per annum, and has been so for several years and It is a great concern “.

He added: “We hope that the program with the IMF, of 45 trillion dollars with the Fund, is on track. That’s why you have to be on the right track and see how it ends ”. He noted that the World Bank is backing the program with $ 2 billion in loans. “Within that floor, the idea is to lower inflation, keep the fiscal balance healthy, so it’s too early to talk about hyperinflation ”.

Regarding how to reduce the tax gap in our country, I would like to point out that “even if efficiency improvements have been made in Argentina, there are more and more opportunities to seek savings ”.

As for the region, the report indicates that the consequences of the crisis persist and need to be addressed. Although poverty has dropped from 30% in 2021 to 28.5% in 2022, it is still at a high level.

Maloney noted that “managing the growing debt burden resulting from the crisis while creating sufficient fiscal space to make growth-promoting investments requires new sources of revenue that will need to be carefully screened, as well as better use of existing spending. On average. 17 per cent of public spending could be saved and, in two thirds of the countries, this saving would serve to eliminate current fiscal deficits ”.

“Rationalizing public sector spending is a step towards building more efficient, responsive and accountable governments,” he added.

The report argues that countries should carefully analyze public spending and fiscal policy options to promote equity and avoid potential negative effects. This includes improving the efficiency of spending: on average, 4.4 percent of GDP, or 17 percent of government spending, is wasted on misdirected transfers, poor public procurement and inefficient human resource policies.

The report also analyzes the tax situation in the region and advises against VAT increase in Argentina. He believes that in terms of VAT some countries – such as Bolivia, Ecuador, Mexico, Paraguay and most of the Central American countries – could have room for further increases, “while in Argentina and Uruguay – and to a lesser extent Brazil and Colombia – andThese would have a decidedly negative impact on growth ”.

Source: Clarin

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