IMF slashes Argentina’s growth forecast for 2024

The IMF announced Tuesday it has significantly scaled back Argentina’s 2024 growth prospects, and now expects its economy to contract for a second straight year amid an ongoing financial crisis.

The International Monetary Fund predicts that the South American country’s economy will contract by 2.8 percent this year, following an estimated contraction of 1.1 percent in 2023.

This marks a 5.6 percentage point cut from its last economic forecast in October, when it predicted growth of 2.8 in 2024.

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Latin America’s third-largest economy is grappling with a severe economic crisis after decades of mismanagement that has driven poverty levels to 40 percent, and pushed inflation to an annual rate of more than 200 percent.

Argentina’s newly elected President Javier Milei, a populist outsider and self-described “anarcho-capitalist,” has embarked on a dramatic cost-cutting drive to turn things around, devaluing the peso by more than 50 percent, cutting state subsidies for fuel and transport, and reducing the number of ministries by half.

He has insisted that the immediate pain these policies are causing will be worth it in the longer term. But many citizens fear his package of deregulation and economic reform will leave them less well-off, and have taken to the streets in protest in recent days.

Argentina’s economic woes are reflected across the updated forecasts to the IMF’s World Economic Outlook (WEO).

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The Fund’s 2024 growth forecast for Latin America and the Caribbean was revised down 0.4 percentage points to 1.9 percent, reflecting “negative growth in Argentina in the context of a significant policy adjustment to restore macroeconomic stability,” it announced in the WEO update on Tuesday.

The IMF also noted that Argentina’s inflationary surge was the main driver pushing up the 2024 inflation outlook for emerging market and developing economies to 8.1 percent.

“The realignment of relative prices and elimination of legacy price controls, past currency depreciation, and the related pass-through into prices is expected to increase inflation in the near term,” it added.

© Agence France-Presse