The International Monetary Fund drastically reduced This Tuesday Argentina’s growth prospects for 2024, among the adaptation of the new government of Javier Mileiand said that the country will enter recession up to 2.8%, a sharp decline from what was estimated in October last year. However, the organization expects a strong recovery next year, when it expects 5% growth.
The Fund published this Tuesday the latest update of its Global Economic Outlook report – known as WEO for its acronym in English – from South Africa. Globally, the report talks about moderate inflation and strong growth which pave the way for a “soft landing” of the planetary economy after the pandemic. However, Argentina, immersed in a historical crisis and in a harsh adjustment plan, It doesn’t fit into this global model.
The figures for Argentina estimated this Tuesday by the Fund have undergone a sharp change. In the last screening of October, made during the government of Alberto Fernández and before the elections which declared Milei the winner, the Fund estimated that GDP would recover from the 2.8% decline in 2023 to a 2.8% increase this year.
But the predictions it has changed for Argentina more than in any other country of those interviewed by the organization: now indicate that Argentina’s Gross Domestic Product will fall to recessionary levels of 2.8% this year, a difference of -5.6 percentage points compared to the October projection. This sharp decline occurs “in the context of a significant adjustment in economic policy restore macroeconomic stability“, the report states.
For next year, however, a strong recovery of the Argentine economy is expected, up to 5%.
Since October many variables have changed in Argentina. The objectives of the program that the former minister Sergio Massa promised it meet in August They crashed in the middle of “Platita Plan”which involved huge fiscal expenses and the depletion of reserves, while the agreement with the Fund was frozen.
Then Milei arrived at the Casa Rosada predicting strong spending control and even more drastic measures than those proposed by the organization Unlocked a technical overhaul in mid-January with new objectives and with promises of strong fiscal adjustment, restrictive monetary policy and greater reserve accumulation.
The final green light for this review will have to be given by executive council which will meet this Wednesday in Washington to deal with the Argentine case and if approved it will be unblocked an outlay of approximately 4.7 billion dollars.
Milei’s plan includes a fiscal adjustment with the removal of subsidies, rate increases, privatization of public companies, reduction of expenses, cutting of transfers to the provinces, flexibility of work and many other measures to achieve the objective of 2% primary surplus agreed with the organization, a package that will require a lot of commitment from the Argentines with a the economy will cool as the Fund now predicts.
The plan is reflected in the DNU and in the omnibus law being discussed in parliament and which has failed to gain consensus in its entirety. But Minister Luis Caputo insists that the objective will also be achieved.
The Fund likes these measures and they want them to be expressed by consensus. According to the agency Reutersthe list it could allow Argentina to postpone the latest review this year scheduled for September to allow Milei management to have a higher margin implement economic reforms and potentially negotiate a new program.
What will happen in the world in 2024, according to the IMF
In its global forecasts, the Fund projects global growth of 3.1% in 2024 and 3.2% in 2025, which means that the forecast for 2024 is 0.2 percentage points higher than that of the October edition. “This is due to stronger-than-expected resilience in the United States and several major emerging market and developing economies, as well as fiscal stimulus in China,” they said.
The report projects 2024 growth of 2.1% in the United States; 0.9% in the European Union; 4.6% in China; 1.7% for Brazil and 2.7% for Mexico, among others.
Additionally, the IMF noted that inflation is falling faster than expected in most regions as supply-side problems dissipate and tight monetary policy is implemented. The overall level of global inflation is expected to fall to 5.8% in 2024 and 4.4%% in 2025, which represents a downward revision of the forecast for 2025.
“In the face of disinflation and sustained growth, the probability of a hard landing is decreased, and risks to global growth are broadly balanced,” the report notes.
However, he warns of some risks that could impact growth: “The conflict in Gaza and Israel could intensify and affect the entire region, which produces approximately 35% of the country’s exports Petrolium in the world and 14% of gas companies. Continued attacks in the Red Sea – through which 11% of world trade flows – and the ongoing war in Ukraine could cause further negative supply shocks to the global economic recovery, with rising food prices and of energy and transport costs”.
Source: Clarin
