Argentina’s growth will slow to 2% in 2023 from 4.6% in 2022, according to the International Monetary Fund (IMF) World Economic Outlook update, published yesterday. The previous forecast, published in October 2022, had predicted 4% growth for last year.

Quoting the Russian war against Ukraine and its consequences, the report predicts that global growth will decelerate from 3.4% in 2022 to 2.9% in the upcoming year. 

Growth in Latin America and the Caribbean is projected to decline from 3.9% in 2022 to 1.8% in 2023 before recovering to 2.1% in 2024, although with tighter financial conditions, lower prices of exported commodities, and downward revisions to trading partner growth. 

Argentina has been under the eye of the agency due to its Extended Fund Facility (EFF) agreement. “Argentina had stronger manufacturer and retail activity than expected in 2022,” said Pierre-Olivier Gourinchas, the Economic Counsellor and the Director of Research of the IMF, in a press briefing. “Now we’re expecting a slowdown, due to a combination of external forces and the tightening policies to handle the elevated inflation,” he added. 

Inflation in Argentina spiked to 94.8% in 2022 – the highest since 1990, when hyperinflation drove prices up by 2,314%. However, according to the National Statistics Institute INDEC, Argentina’s GDP expanded in the third quarter of 2022 slightly above market forecasts. Household consumption rose by 10.2% in 2022. 

Meanwhile, the expansion in gross fixed capital formation slowed to 14% from 19.1%. Net foreign demand also contributed negatively to GDP, as imports soared by 21% while exports shrank by 4.6%. 

Argentina’s EFF program with the IMF sets economic goals regarding the country’s fiscal and monetary policies, as well as international reserve accumulation. “We believe it’s really important that the policy targets are met, both fiscally and monetarily, in order to stabilize the economy,” said Gourinchas.

The current program was reached between the agency and the national government in March 2022. The previous deal, taken on by then-President Mauricio Macri in 2018, was the largest loan in the IMF’s history at US$44 billion.

 This year, the IMF deal stipulates that the country must reach a 1.9% fiscal deficit.