Argentina's economy will contract 2.5 percent this year and inflation will end the year at 121.7 percent, according to a new forecast by the International Monetary Fund (IMF).
By then, the cost of living will then have risen 135.7 percent from the previous year and unemployment will rise to 7.4 percent, the multilateral lender said.
The estimates come from the IMF’s latest World Economic Outlook report, which was published on Tuesday at this year's annual meeting in Morocco. The revised forecasts are the first issued since the August devaluation of the peso – reportedly an imposition by the organisation to authorise a disbursement of US$7.5 billion from Argentina’s record US$44.5-billion credit programme.
The IMF forecasts are more optimistic than those offered by local consultants, many of whom estimate a contraction of 3.5 percent of gross domestic product this year and a distinctly higher inflation rate.
The most recent survey of market expectations by the Central Bank predicted that consumer prices will rise 170 percent this year. In contrast, the IMF said that measured "end to end" inflation will reach 135.7 percent, while measured on average it will be 121.7 percent.
Outlook for 2024
For the coming year, the IMF forecasts an improvement in economic activity of 2.8 percent, likely recovering all that will be lost this year.
On the basis of a lower level of activity in the second half of the year as a result of the recession, the IMF calculates that unemployment will be 7.4 percent, but next year with the improvement in activity it would be reduced to 7.2 percent.
It should be noted that most private analysts also expect the economy to grow in 2024 as the effects of the drought are overcome and additional dollars are expected to come in from the energy sector.
However, Argentina’s economic outlook and approach to inflation could be shifted dramatically by whoever wins the election on October 22.
The IMF paper published today makes no reference to Argentina’s fiscal deficit, which the government wants to keep to 1.9 percent of GDP in line with targets stated in the IMF programme.
The work is also based on the fact that Argentina will maintain an agreement with the organisation and that there will not be a default placing the country outside the global financial network.
The IMF is holding its Annual Summit in Marrakech this week. Unlike in previous years, Economy Minister Sergio Massa will not be travelling due to the ongoing election campaign. He is likely to be represented in Morocco by his deputy minister Gabriel Rubinstein. Central Bank Governor Miguel Pesce will be in attendance.
For the IMF, Latin American and Caribbean as a whole will grow 2.3 percent this year in GDP terms, 0.4 percentage points more than forecast in July.
The lender also improved the forecasts for Brazil, which will grow 3.1 percent (one percentage point more than estimated in July) and Mexico, whose economy will expand 3.2 percent (0.6 percentage points).
Globally, the institution maintained its global growth forecast of three percent for 2023, and cut its 2024 forecast by one tenth of a percentage point to 2.9 percent, compared to July's estimate.