The International Monetary Fund on Tuesday lowered its growth forecast for Argentina, predicting that the troubled nation's economy will grow by just 0.2 percent this year.
In its World Economic Outlook (WEO) report, the Fund also lowered its outlook for global GDP, while predicting that most countries will avoid a recession this year despite economic and geopolitical concerns.
The Fund's updated estimate for Argentina, a significant drop from a two percent growth forecast issued last October, echoes pessimism from other international bodies.
Recognising the likely impact of a punishing drought, the World Bank earlier this month predicted zero growth for the country in 2023. The institution expects Argentina's economy to grow two percent in 2024, a figure with which the IMF concurs.
However, the latest Central Bank survey of market analysts and economists forecasts a contraction of 2.7 percent of GDP this year, with an inflation rate of 110 percent.
The IMF forecast Tuesday that Argentina's inflation rate for 2023 will be 88 percent for the calendar year (December 2022 to December 2023) – a jump from its previous estimate of 60 percent. Prices will increase 98.6 percent, said the Fund.
Only Venezuela (with a projected annual inflation of 250 percent) and Zimbabwe (with 181 percent) surpass Argentina in the IMF’s forecasted ranking.
Argentina’s economy grew 5.2 percent last year.
Overall, the IMF predicted the global economy will grow by 2.8 percent this year and three percent in 2024 – a decline of 0.1 percentage point from its previous forecast in January.
According to the IMF, the US economy is expected to grow by 1.6 percent, up 0.2 percentage points on the IMF's previous forecast. US growth is then predicted to slow to 1.1 percent next year, up 0.1 percentage point from January.
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"The global economy is recovering from the shocks of the last few years, and particularly of course the pandemic, but also the Russian invasion of Ukraine," IMF chief economist Pierre-Olivier Gourinchas said in a press briefing ahead of the release of the report.
The leadership of the World Bank and IMF hope to use this year's spring meetings to promote an ambitious reform and fundraising agenda, he added.
But their efforts will likely be overshadowed by concerns among member states over high inflation, rising geopolitical tension, and financial stability.
Advanced economies drag down growth
The overall picture painted by the WEO is a gloomy one, with global growth forecast to slow in both the short and medium terms.
Closer to home, the multilateral lender forecast that Latin America and the Caribbean will grow 1.6 percent this year – a drop of 0.2 points – and by 2.2 percent in 2024. Central America will grow by 3.8 percent this year and the Caribbean by a whopping 9.9 percent.
The IMF predicted a rise in GDP of 0.9 percent for Brazil, with 1.8 percent for Mexico, 1.8 percent for Bolivia and one percent for Colombia. Ecuador's economy will grow by 2.9 percent, said the Fund, which sees 4.5 percent growth for Paraguay, 2.4 percent for Peru, two percent for Uruguay and an improvement of five percent for Venezuela.
Close to 90 percent of advanced economies will experience slowing growth this year, while Asia's emerging markets are expected to see a substantial rise in economic output – with India and China predicted to account for half of all growth, IMF managing director Kristalina Georgieva said last week.
Low-income countries, meanwhile, are expected to suffer a double shock from higher borrowing costs due to high interest rates, and a decline in demand for their exports, Georgieva said. This could worsen poverty and hunger.
The IMF expects global inflation to slow to seven percent this year, down from 8.7 percent last year, according to the WEO forecasts.
This figure remains significantly above the two-percent target set by the US Federal Reserve and other central banks around the world, suggesting monetary policymakers have a long way to go before inflation is brought back under control.
The IMF's baseline forecasts assume that the financial instability sparked by the collapse of Silicon Valley Bank last month has been broadly contained by the "forceful actions" of regulators on both sides of the Atlantic, Gourinchas told reporters.
But he added that central banks and policymakers have an important role to play to buttress financial stability going forward.
Recession on way?
While the picture is one of slowing growth, almost all advanced economies are still expected to avoid a recession this year and next.
Alongside growth in the US, the Euro area is also forecast to grow by 0.8 percent this year, and 1.4 percent next year, led by Spain, which will see 1.5 percent growth in 2023 and two percent growth in 2024.
But Germany is now expected to contract by 0.1 percent this year, joining the United Kingdom as the only G7 economy expected to enter recession this year.
The picture is more positive among emerging market economies, with China forecast to grow by 5.2 percent this year. But its economic growth is predicted to slow to 4.5 percent in 2024, as the impact of its reopening from the Covid-19 pandemic fades.
India's economic forecast has been downgraded from the previous forecast in January, but it is still predicted to grow by 5.9 percent this year and 6.3 percent in 2024, providing some much-needed stimulus to the global economy.
And Russia is now expected to grow by 0.7 percent this year, up 0.3 percentage point on January's forecast, despite its invasion of Ukraine.
Looking forward, the IMF forecasts that global growth will fall to three percent in 2028, its lowest medium-term forecast since the 1990s.
Slowing population growth and the end of the era of economic catch-up by several countries including China and South Korea are a large part of the expected slowdown, as are concerns about low productivity in many countries, according to Daniel Leigh, who heads the World Economic Studies division in the IMF's Research Department.
"A lot of the low hanging fruit was picked," he told reporters ahead of the publication of the World Economic Outlook.
"On top of that now, with the geopolitical tensions and fragmentation, this is going to also weigh on growth," he said.