The International Monetary Fund (IMF) has changed its forecast for Argentina’s economy and now estimates that GDP will shrink by 3.5% in 2024.
The data from the July World Economic Outlook (WEO) report, published Tuesday, shows the multilateral organization expects the recession to worsen over the upcoming months in Argentina: in April, it had estimated GDP to drop 2.8% during this year.
The Fund also predicted a 140% annual inflation rate for 2024, a correction to its April estimate of 149.4%. Argentina’s prices went up by 211% during the 2023 calendar year.
However, there are better hopes for 2025: the report forecasts the national economy will grow by 5%. It is the same forecast made in its previous WEO report from April and one of the most optimistic for the region.
At a global level, the IMF expects the economy to grow 3.2% in 2024 and 3.3% in 2025.
Pierre-Olivier Gourinchas, the Fund’s chief economist, said it’s “good news” that inflation is “coming down very significantly in Argentina” during a press conference on Tuesday.
The estimated 140% inflation rate “is still a high number, but it is also a reflection of a lot of the inflation that has already happened,” Gourinchas said. “And the sequential inflation is coming down quite fast on the back of very strong measures that have been implemented by country authorities,” particularly President Javier Milei’s sweeping fiscal reforms.
“For the first time in a long, long time, the government has delivered a balanced budget. The question is whether it can continue doing so in the future,” the economist said, adding that engagement with Congress and having high quality measures on the fiscal side are key and seem to already be in place.
Gourinchas also mentioned the importance of tightening monetary policy to end the government. “All of these things are going in the direction of bringing inflation under control, but it has an impact in terms of economic activity,” the IMF official recognized. Less public spending, he said, has led to tighter monetary conditions, and altogether to “a very significant slowdown for 2024 in Argentina.”
The news comes in the midst of financial turmoil for Argentina. On Monday, the government started selling U.S. dollars in the financial markets in a bid to decrease the parallel exchange rates after they reached record-high levels last week.
The strategy, also used during Alberto Fernández’s administration, was presented by Milei as part of the “zero monetary emission” plan announced two weeks ago to close all “peso emission faucets.” In this particular “faucet,” Milei said, pesos are issued when the Central Bank buys U.S. dollars for its international reserves. The government will now aim to buy back those pesos in the financial market by selling its dollars.
Monthly inflation in Argentina ticked up by 0.4 points to 4.6%, figures released on Friday afternoon by the INDEC statistics bureau showed. The results represented the first increase after five decreases in a row. Yearly inflation ticked down four points to 271.5% in June, and prices have risen 79.8% in the first half of the year.