WASHINGTON.- The International Monetary Fund (IMF) predicts that inflation in Argentina will fall to 150% annually by the end of this year, while the gross domestic product (GDP) will suffer a drop compared to the previous year of 2.8% due to the strong fiscal adjustment and the corrections in the economy imposed by the government of Javier Milei, the same forecasts that the organization had at the beginning of this year. The Fund estimated that inflation will decline more sharply to 45% annually by the end of next year.
The Fund presented this Tuesday in Washington its latest projections for the global economy of the World Economic Overview (WEO, according to its acronym in English), the flagship report of the organization that includes all the estimates of the Research Department for the member countries.
The chief economist of the IMF, Pierre-Olivier Gourinchasgave his view on the economy at a press conference in Washington within the framework of the spring meeting of the Fund and the World Bank, in which he answered a question about Argentina.
The Fund predicts that the Argentine economy will contract 2.8% this year compared to the previous year, in the midst of the strong fiscal adjustment carried out by the Milei government to balance public accounts and strangle inflation. By 2025, the Fund anticipates a recovery of the economy with growth of 5% compared to this year. When asked about THE NATION Regarding whether the Fund foresees that the economy’s rebound will be in “V”, “U” or “L”, an incipient debate among economists who closely follow the country, Gourinchas only limited himself to saying that the best option is one V”.
“The progress so far has been really impressive,” Gourinchas said of the economic program when LA NACION asked about the Fund’s projections.
“The authorities have been able to record a fiscal surplus for the first time in more than a decade. But of course this will take some time and require strong policy implementation and much more needs to be done on a broader scale. We are closely monitoring this situation with our teams here at the Fund who are in close contact with the authorities. But the progress again has been quite strong,” he added.
Gourinchas’ evaluation was in line with the latest statements from the Fund, which has had strong support for the Milei program mixed with concerns in the background, such as the low quality of the fiscal adjustment – achieved largely thanks to the liquefaction of expenses , or the “blender” – and its impact on the most vulnerable sectors, such as retirees
The Fund estimates that inflation will fall to 149.4% at the end of this year and to 45% at the end of 2025, in line with some private forecasts that anticipate a sharp drop of the rise in the cost of living in the second half after the last peak in March, when the consumer price index (CPI) reached a peak interannual variation of almost 290% annually driven by the devaluation of the peso in December and the rearrangement of relative prices.
The Chief of Staff, Nicolás Posse, and the Minister of Economy, Luis Caputo, will travel to Washington tonight to participate in the spring meeting of the IMF and the World Bank. The Treasury Palace released a brief official agenda without including details of all of Caputo’s activities in Washington, but it is known that he will have meetings at the IMF, the Treasury, the World Bank, the Inter-American Development Bank (IDB), and also He will participate the same day he arrives from a seminar organized by the investment bank JP Morgan.
Caputo will also participate in the G20 meetings. The president of the Central Bank will travel with him, Santiago Bausiliand the Secretary of Finance, Pablo Quirno
Posse will also have working meetings with the National Security Council at the White House with the Daniel EriksonJuan González’s replacement, and with the Deputy National Security Advisor for Cyber and Emerging Technology, Anne Neuberger.
Global resilience
The pillar of the report this year is the resilience that the global economy showed during the disinflation process after the coronavirus pandemic, which generated an inflationary outbreak that forced countries to implement an inflationary adjustment by raising interest rates. Despite the stagflation forecasts that populated the analyzes during the previous year, the global economy avoided a recession, and remained firmly on the path of growth.
“Despite the gloomy predictions, the global economy remains remarkably resilient, with steady growth and inflation slowing almost as quickly as it rose,” Gourinchas described in the commentary that usually accompanies the release of the report. “The journey has been eventful, starting with supply chain disruptions following the pandemic, an energy and food crisis triggered by Russia’s war against Ukrainea considerable increase in inflation, followed by a globally synchronized adjustment of monetary policy,” he added.
Due to this notable performance, the Fund foresees fewer “scars” from the economic crisis of the last four years, marked by the blackout suffered by the global economy with the coronavirus pandemic and the subsequent resurgence in prices, which led to an unprecedented monetary adjustment of the world’s main central banks in sync.
The Fund’s report highlights that global growth bottomed at the end of 2022, shortly after average headline inflation peaked at 9.4 percent. The latest projections predict that growth this year and next will remain stable at 3.2 percent, and average headline inflation will decline from 2.8 percent at the end of 2024 to 2.4 percent at the end of 2025.
“Most indicators continue to point to a soft landing,” Gourinchas summarized.