OECD fears disaster for Miley plan. Inflation and growth projections for Argentina get worse in 2024

The Organization for Economic Co-operation and Development (OECD) estimates that Argentina will reach Inflation 250.6 percent and decline in activity 2.3 percent, Estimates of both variables become worse Regarding the organization’s projections in the November 2023 report, before the victory of Javier Miley in the presidential elections. In that report he predicted inflation of 157 percent and a decline of 1 percent in activity. The organization’s experts conducted the review, with Argentina the largest of all the countries assessed.

However, in its outlook report, the OECD has improved its medium-term outlook. For 2025, it estimates inflation will be 64.7 percent, still well above other countries in the region like Brazil or Mexico, which will be around 3 percent and 3.2 percent year-on-year, respectively. Similarly, it projects GDP growth of 2.6 percent compared to a decline the year before.

“As a result of high inflation and considerable fiscal tightening, output in Argentina is projected to decline in 2024 before growth rates recover in 2025,” the agency says. The Paris-based organization said the expected recovery in the economy next year will come as reforms begin to take effect. Meanwhile, the OECD said, “Tighter capital controls, rising inflation and high political uncertainty will further limit consumption and investment in the short term.”

Jens Arnold, head of the economics department of the organization that sets conservative policies in Western countries, said that “Argentina’s macroeconomic policies have taken a positive path towards stabilization and reducing accumulated imbalances, but On this path, things are going to get worse before they get better.

inflation

Within the framework of the economic policies implemented by Xavier Miley, the OECD projected, with a devaluation of the peso of 50 percent, “an acceleration of general inflation at the end of 2023, indicating a strong carry-over effect for average annual inflation in 2024.” Gives.” percent, initiating the price liberalization process and proposing to modify hundreds of rules and laws. Argentina will have the highest share in 2024 (250.6 percent), followed by Turkey (49.3 percent). And the remaining countries with single digit figures.

In inflationary matters, the report places Argentina in a special position along with Turkey, as the two are “exceptional cases, with very high inflation rates derived from loose macroeconomic policies in the past.” “Overall consumer price inflation for the G20 will be higher in 2024 than in 2023 – 6.6 percent in 2024 versus 6.3 percent in 2023 – but this is distorted by higher inflation in Argentina and Turkey, excluding these countries, a decline in G20 inflation from 3.6 It is estimated to grow by 2.6 per cent in 2023, 2.6 per cent in 2024 and 2.4 per cent in 2025,” the report estimated.

The IMF, for its part, has estimated that monthly inflation will return to “single digits” by “the middle of this year” and by the end of 2024 with a cumulative increase of about 150 per cent compared to 211 per cent in 2023.

Development

According to the OECD’s outlook, Argentina will be the only country with an economic contraction in 2024: the world economy will grow by 2.9 percent and the countries leading it will be India (6.2 percent), Indonesia (5.1 percent) and China (4.7 percent). ,

The OECD estimate matches that made by the International Monetary Fund (IMF) last week, when it revised it downwards and predicted Argentina’s economy would shrink by 2.8 percent, and then 5 percent in 2025. There will be an increase of. According to the Economic Outlook Report.

In the last October report, the IMF had estimated growth of 2.8 percent this year. The downward revision responds to “significant policy adjustments” made by the government of Xavier Miley to “restore macroeconomic stability”.

With this decline, the country will have the largest decline in 2024 among the 30 countries chosen by the Fund for its global projections, although it will be the third largest growth country in 2025 after India and Kazakhstan.

On Wednesday, Kristalina Georgieva, managing director of the International Monetary Fund (IMF), summarized these figures under the assumption that the Argentine government is “taking bold solution To restore macroeconomic stability”, to describe economic adjustment that will result in, at least, stagflation in the first year of the government.