The International Monetary Fund (IMF) has changed its forecast for Argentina’s economy and now estimates that GDP will shrink by 2.8 points in 2024 — a whopping 5.6 downward revision from its October forecast, when it expected the country’s economy to grow by 2.8 points.

The forecast, published in the Fund’s most recent World Economic Outlook update, came on Tuesday, one day before the lender’s board is set to meet to discuss Argentina’s case and possibly unlock a US$4.7 billion disbursement.

The IMF also calculated that the 2024 inflation rate will be around 150%, according to Chief Economist Pierre-Olivier Gourinchas. “Part of the current government’s efforts are aimed at lowering a number of relative price distortions that were in place under the previous administration,” Gourinchas said in a press conference on Tuesday.

According to Gourinchas, December’s devaluation and subsidy elimination are fueling short term inflation. The IMF’s World Economic Outlook said that the economy’s drop is taking place within “a significant policy adjustment to restore macroeconomic stability.”

The Fund estimates that the GDP will grow by five points in 2025 and that inflation, now at a 25.5% monthly rate, will decrease to “single digits by the middle of this year” and could fall “even further,” Gourinchas said.

He added that a return to economic growth depended on the success of the fiscal consolidation that the administration was carrying out. Gourinchas stated that the government is trying to reach a 2% fiscal surplus, or a five percentage point GDP adjustment, in 2024. 

“It’s a very sizable fiscal adjustment,” he said.

On January 10, the IMF and Argentina reached a staff-level agreement that could mean access to US$4.7 billion. The following week, Economy Minister Luis Caputo met with Gita Gopinath, the lender’s first deputy managing director. A source from the ministry told the Herald that Gopinath “stressed the importance that politics accompany the measures,” implying the need for political support for Milei’s mega-decree and omnibus bill.

Last week, Caputo announced that the government would drop the fiscal chapter of Milei’s flagship omnibus bill, but clarified that the government is “still committed to zero deficit.” On Tuesday, Chief of Staff Nicolás Posse traveled to Washington to meet Gopinath.

The lender’s board will hold a meeting on Wednesday to discuss Argentina’s case, which could unlock the disbursement under the current Extended Fund Facility agreement. The same day, the Argentine Congress will begin to debate the omnibus bill.

On Monday, Reuters published that the IMF will allow Argentina to defer the last programmed review of its US$44 billion loan by two months, giving the government more time to apply reforms and potentially negotiate a new program. According to the news agency, the government and the IMF agreed that the 10th and final review of the current program signed under Alberto Fernández’s presidency in 2022, initially set for September, will be postponed to November.