IMF Revises Argentina's Economic Forecasts
The International Monetary Fund (IMF) has further downgraded Argentina's growth prospects for this year, predicting a 3.5% contraction in GDP, a significant increase from the 2.8% recession forecasted in April. The IMF's July update of the Global Outlook Report (WEO), presented in Washington, highlights the impact of the fiscal and monetary adjustments undertaken by the far-right government of Javier Milei. Despite these measures aimed at combating inflation, the Argentine economy is experiencing a deeper recession than initially anticipated.
The IMF report notes that inflation in Argentina is expected to slow from 211% in 2023 to 140% by December. Pierre-Olivier Gourinchas, responsible for disseminating the report, acknowledged the effectiveness of the fiscal measures but warned that reduced public spending and tighter monetary conditions have significantly impacted economic activity. The Milei government has celebrated the approval of the Base Law, designed to minimize state intervention and promote the private sector, although immediate results have been mixed.
Optimism for 2024 Despite Current Recession
Looking ahead, the IMF is optimistic about Argentina's economic rebound in 2024, forecasting a 5% growth in GDP. This optimism is based on the expectation that the impact of fiscal contraction will diminish, confidence will be restored, and real wages will grow. The IMF Board emphasized the need for Argentina to improve the quality of its fiscal adjustments, initiate steps towards a better monetary and exchange rate policy framework, and implement structural reforms.
The IMF has recently approved the eighth review of its program with Argentina, releasing $800 million to help the country manage its multilateral debt. The Argentine government aims to negotiate a new agreement to secure an additional $15 billion to ease current exchange restrictions.
In contrast, Brazil's growth forecast for 2024 has been slightly revised downward to 2.1% due to the short-term impact of floods. However, the IMF expects Brazil's economy to grow by 2.5% in 2025, driven by post-flood reconstruction and favorable structural factors such as accelerated hydrocarbon production.
