MercoPress. South Atlantic News Agency

IMF says Argentina improving but results not expected this year

Milei has applied tight constraints to recover from the fiscal deficit under Alberto Fernández

According to the World Economic Outlook released Tuesday by the International Monetary Fund (IMF), Argentina's inflation in 2024 is expected to reach 149.4%. The study also forecasted that the country's economy would fall by 2.8% this year only to bounce back in 2025 by 5%. The Consumer Price Index (CPI) would be dropping to 45%.

Launching the report in Washington DC was IMF's Chief Economist Pierre-Olivier Gourinchas, who also noted that under President Javier Milei, unemployment would be on the rise in 2024 but the trend would decrease next year.

In this scenario, Argentina's Economy Minister Luis Toto Caputo was flying Tuesday evening to the US for further talks with the IMF hoping to get fresh funds to suppress the government's grip on the exchange rate. Alongside Caputo were traveling Central Bank President Santiago Bausili and Finance Secretary Pablo Quirno.

During his press conference, Gourinchas insisted Argentina needed to do “much more” and “on a broader scale” to achieve fiscal stability. “This will take some time and will require the implementation of a state class policy,” he also pointed out.

Regarding Argentina, the figures in the latest WEO were very similar to those in January's release when the IMF drastically reduced the country's likely growth from last October's projections.

Milei has launched a severe adjustment plan cutting 5% of Argentina's Gross Domestic Product to recover from a 6% GDP deficit under Alberto Fernández.

“The authorities are implementing a very ambitious plan to restore macroeconomic stability,” Gourinchas explained. The Economist Milei is applying “a sharp fiscal tightening” that ”particularly eliminates Central Bank (BCRA) financing of the government, which was one of the factors behind very high inflation figures in previous years,“ Gourinchas also pointed out.

”That is already showing its effects: we see this sharp decline in inflation and the progress so far has been really impressive. The authorities have been able to record a fiscal surplus for the first time in more than a decade,” he added.

Argentina recorded 211.4% inflation last year, the highest rate in the world and the highest in the South American country since the hyperinflation of 1989-1990.

The IMF board of directors agreed last Feb. 1 to extend the agreement with Argentina until December 31, 2024. Argentina passed the latest IMF revision and was granted a US$ 4.7 billion disbursement.