The International Monetary Fund revised downwards its growth estimate for Argentina, predicting that South America’s second largest economy will contract for two years consecutive as the president, Javier Milei, pushes for a “significant adjustment of policies.”
Argentina’s Gross Domestic Product, GDP, will contract 2.8% this year as inflation soars, after a fall of 1.1% in 2023, according to the IMF’s most recent estimates for the global economy published on Tuesday. In October, the Fund forecast 2.8% growth in 2024.
Since retiring from the position in December, Milei eliminated government subsidies and price controls, announced a 54% currency devaluation and presented plans to shore up public accounts. Thousands flocked to the capital, Buenos Aires, last Wednesday after unions called a 12-hour strike to protest their austerity measures.
Still, Milei’s plan to eliminate the primary budget deficit this year is proving difficult to implement. In an attempt to get his key reform package passed in Congress, he renounced hundreds of proposed measures, including plans to increase taxes on exports and privatize oil company YPF.
Analysts in the most recent survey by the Argentine central bank predict that the economy will contract 2.6% in 2024. In November, the Institute of International Finance projected a 1.3% contraction this year.
Faced with inflation that accelerates in the short term as relative prices realign, Argentina’s fall will also affect Latin American growth during 2024. IMF economists anticipate that the region will grow only 1.9%, below last year’s 2.5% pace. Argentina could grow again in 2025, and the Fund estimates an expansion of 5%.