The OECD has revised its inflation forecasts for Argentina sharply upwards 250.6% this year, compared to the 157.1% expected in November, in the wake of the first measures adopted by the ultra-liberal president Javier Milei.
“General inflation accelerated at the end of 2023, implying a strong carryover effect for average annual inflation in 2024,” the Paris-based Organization for Economic Co-operation and Development estimated.
“Monthly inflation rose to 25.5% in December 2023 and is expected to do so it stands at similar levels to January. This explains the strong upward revision,” explains Jens Arnold, head of the organisation’s economics department.
Since taking office less than two months ago, Milei has devalued the peso by 50%, started a process of price liberalization and is proposing to change hundreds of regulations and laws to try to reverse a crisis that keeps people in poverty beyond 45% of Argentines.
“This is expected to cause high inflation and considerable fiscal adjustment a decline in GDP in Argentina in 2024before growth resumes in 2025, when reforms start to take effect,” reads the OECD quarterly report.
The organization plans a stronger recession this yearwith a GDP contraction of 2.3%, compared to the 1.3% expected in November.
In 2025 Argentina would return to growth, with a GDP expansion of 2.6%, seven tenths above the previous forecast. That year, according to the economic organization, inflation would have been 64.7%.
“Argentina’s macroeconomic policies have embarked on a positive path towards stabilization and reduction of accumulated imbalances, but along this path, things get worse before they get better” Arnold noted.
After coming to power, Milei warned that the situation would worsen in Latin America’s third-largest economy, initially with “stagflation”, i.e. a combination of stagnation and high inflation in 2024.
On Wednesday, International Monetary Fund (IMF) Managing Director Kristalina Georgieva estimated that the Argentine government is “taking bold measures to restore macroeconomic stability.”
Source: Clarin
