World Bank sees Argentina’s economy growing 3.6% this year

Argentina is on track to record three consecutive years of economic growth for the first time since 2008, according to a new report by the World Bank, and is a bright spot for the wider region.

In the latest edition of its regular report assessing the economic outlook for nations in Latin America and the Caribbean, World Bank technicians forecast that Argentina’s economy will grow by 3.6 percent this year and by 3.7 percent in 2026.

Argentina’s GDP improved by 4.4 percent last year, according to data from the INDEC national statistics bureau. 

Noting that the region’s prospects as a whole “remain limited,” the World Bank said that Argentina “stands out” for its relatively high forecast. 

The projections for Argentina contrast sharply with the 1.6 percent forecast for Brazil and 1.3 percent for Mexico over the same period.

“Argentina has emerged as the main upward exception, as stabilisation and reforms have improved expectations and financial conditions,” said the World Bank, which noted that fiscal consolidation “has helped anchor inflation expectations and reduce sovereign risk.”

The report’s authors praised President Javier Milei’s government and his “pro-growth agenda that includes tax reform,” highlighting the implementation of the RIGI major investment incentive scheme, the “strategic framework” signed with the United States “to strengthen critical minerals supply chains” and movement on the trade deal between the Mercosur regional bloc and the European Union. 

There was also praise for Milei’s tax reform bill and “ongoing efforts to improve the business climate and regulatory environment.”

Nevertheless, World Bank economists warn that “significant downside risks” to the economy still remain, mostly linked to the external sector, debt, and dollar inflows. 

“Downside risks are substantial, particularly given Argentina’s considerable external financing needs in a context of negative net international reserves and limited access to international debt markets,” the report states.

The World Bank report also warned about the costs and distortions of Tierra del Fuego industrial promotion regime, describing it as a case of “failed” policy with a significant fiscal impact.

The scheme – created in 1972 with the aim of encouraging population growth and employment on the island through tax exemptions and trade benefits – “is widely regarded as a case of failed industrial policy, marred by political interference and fundamental design flaws that have persisted for decades,” analysed the report.

The regional incentive structure was “poorly designed” and has resulted in an estimated fiscal cost of around US$1.07 billion per year, without significant improvements in productivity or technology, technicians concluded.

“The Tierra del Fuego regime represents a case of persistent policy failure, sustained less by economic rationale than by political considerations. The activity it supports is not self-sustaining,” the organisation concluded.

The World Bank predicted regional growth of 2.1 percent in 2026 – below the 2.4 percent recorded last year and making Latin America and the Caribbean one of the worst-performing regions in the world. 

“The overall performance of Latin America and the Caribbean has been disappointing under both interventionist and non-interventionist models,” the report warns.

– TIMES/NA/PERFIL/AFP