EThe IMF on Monday downgraded its growth forecast for Argentina, to a 3.5% contraction in 2024, and upgraded its average annual inflation forecast to 233%.But it warned of the risk of a lingering recession that would “fuel social tensions”.
The financial institution released a detailed report saying it was satisfied with President Javier Mille’s “Chainsaw” plan to drastically cut government spending. But he raised some objections and asked for more tax reforms.
“Impressive progress has been made in achieving overall fiscal balance, and further improving the quality of the adjustment should be a priority,” said Geeta Gopinath, the IMF’s No. 2, after the agency’s executive board agreed to approve the eighth review of the debt agreement. South American country.
The approval allowed immediate disbursement of approximately $800 million.
Impressive progress has been made in achieving overall fiscal balance and further improvement in the quality of adjustment should be prioritized.
“Efforts to reform personal income tax should continue,” he added in a statement released Monday, “rationalizing subsidies and tax expenditures and strengthening public spending controls.” Pension and Income Sharing Systems.”
And, in his opinion, “inflation and exchange policies should continue to evolve to strengthen the inflationary process and further improve the coverage of monetary reserves.”
In the latest update, the gross domestic product (GDP) growth data for this year has been poor, coming in at -3.5% from -2.75% expected in April. But a change in trend is expected in the second half of the year, “as headwinds from fiscal consolidation subside, real wages begin to recover and investment gradually recovers.”
In general, the fund is satisfied with the evolution of the economy and inflation.
According to this latest report, the average annual inflation forecast ranges from nearly 250% to 232.8%.
The IMF says monthly inflation is down to 4% and will fall “further over the medium term”. Reserves are expected to remain unchanged.
Javier Miley
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Risks of economic planning in Argentina
The risks of the loan program, in which the South American country will receive $44 billion over 30 months to boost its international reserves and reduce the fiscal deficit, are “moderate but high,” the finance minister warned.
Milei’s government has “moved the economy firmly away from total crisis and hyperinflation,” the IMF estimates, but the outlook is not without risks.
He warns that external conditions may become less favorable and “recession may persist, fueling social tensions and complicating the implementation of the plan.”
Milei won Senate approval of a controversial reform package last week, but it still has to pass the lower house’s filter.
The IMF is concerned that delays in new legislation will “undermine stabilization and recovery efforts”, but believes that a “social consensus” should be sought given the “fragile social and political panorama”.
Half the population lives in poverty, thousands have lost their jobs and inflation is eating away at pensions and the purchasing power of families.
He warns that external conditions may become less favorable and “recession may persist, fueling social tensions and complicating the implementation of the plan.”
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Argentine minister visits El Salvador to learn about the “Bugel system” against crime
In other news, Argentina’s Defense Minister, Patricia Bullrich, began a four-day visit to El Salvador this Sunday.
“Together against criminals who commit mass murder and believe they own our countries and communities,” Bulrich said on the social network.
Bulrich toured the 40,000-inmate capacity megacison, which is set to open in 2022, along with El Salvador’s Minister of Justice and Public Security, Gustavo Villadoro.
