IMF predicts Argentina’s economic downturn will be deeper than expected — MercoPress

IMF predicts Argentina’s economic downturn will be deeper than expected

IMF links overall setback in Latin America and the Caribbean to Argentina’s performance

According to the International Monetary Fund’s latest World Economic Outlook (WEO) report, Argentina’s gross domestic product (GDP) is expected to fall by 3.5% in 2024, down from the 2.8% forecast in April. For next year, the IMF maintained its 5% growth forecast.

The World Economic Outlook did not include an estimate for Argentina’s inflation rate this year, but officials attending the launch of the latest edition of the World Economic Outlook reportedly agreed to reduce inflation to 140% from 149.4% in April.

The IMF also found that “global growth is expected to remain in line with the April 2024 World Economic Outlook (WEO) forecasts, at 3.2% in 2024 and 3.3% in 2025”. However, “the different momentum of activity at the beginning of the year has narrowed the differences in output across economies as cyclical factors have diminished and activity has become more in line with its potential”, the credit agency said.

It also warned that “accelerating service price increases are slowing the path to deflation, complicating monetary policy,” noting that “upside risks to inflation have increased, making it more likely that interest rates will remain elevated for longer amid heightened trade tensions and political uncertainty.”

“To manage these risks and sustain growth, a careful policy mix will have to be deployed to achieve price stability and replenish depleted reserves,” the WEO said.

As for Latin America and the Caribbean, the forecast was revised down to 1.9% from 2% in April. The IMF links these negative figures to Argentina’s performance. Despite this, it mentions a growth rate of 2.7% in 2025, since “growth in Brazil in 2024 was revised down, reflecting the short-term impact of floods, and in Mexico due to a slowdown in demand”. Brazil is therefore expected to grow by 2.1% this year and 2.4% in 2025. As for Mexico, the Fund estimates that GDP will grow by 2.2% this year and by 1.6% next year.

In Buenos Aires, presidential spokesman Manuel Adorni said these IMF figures “do not surprise anyone” and insisted that the Liberal government of President Javier Milley “is ready for the great take-off and to start talking about other things”. Adorni also admitted that the Milley government still intends to obtain a new loan from the IMF. “The fiscal and monetary program is solid and the drop does not surprise anyone,” explained Adorni, who graduated in economics. In his opinion, the IMF analysis is just a “forecast” and “there is still half a year left in the year”.

Adoni believes that unlike previous years when “economic activity had clearly declined,” the work we are doing in terms of economic order is very difficult.