The International Monetary Fund (IMF) has cast doubt over the inflation expectations of President Javier Milei’s government, with its latest forecast showing significant distance with the Casa Rosada’s own estimates.
In the latest edition of its World Economic Outlook report, IMF staff retained their existing growth projections for Argentina, predicting that gross domestic product will contract 3.5 percent this year. GDP will subsequently increase by five percent in 2025 and 2.6 percent in 2026, said the Fund.
However, IMF technicians differ greatly with the Milei administration on inflation, projecting 139 percent this year and 45 percent next year. In its budget bill to Congress, the government projected consumer prices would rise 18 percent in 2025.
Government sources expect inflation to close out the year at 125 percent, before significantly slowing in the following 12 months. Most private consultancy firms forecast a figure of around 40 percent – closer to the IMF’s projection.
According to the Fund’s staff, Argentina’s projected inflation rate for 2024 would be the fourth-highest in the world behind Zimbabwe (407 percent), Sudan (242 percent) and South Sudan (216 percent).
Globally, IMF experts see global inflation continuing to ease, hitting 5.8 percent this year, before falling to 4.3 percent in 2025.
‘Almost won’
Global growth is expected to ease slightly to 3.2 percent this year and remain at that level in 2025, the IMF said in its report. Global inflation will ease to 5.8 percent, dropping to 4.3 percent in 2025.
"The battle against inflation is almost won," IMF chief economist Pierre-Olivier Gourinchas told reporters Tuesday. "The decline in inflation without a global recession is a major achievement."
The IMF report noted that global growth is expected to trend to a lacklustre 3.1 percent by 2029, and warned of growing risks to that metric.
Beneath the relatively calm outlook for growth through 2025, "the picture is far from monolithic," the Fund said, warning of "important sectoral and regional shifts" taking place over the past six months.
There are also a number of downside risks to growth, Gourinchas said, highlighting the prospect of "an escalation in regional conflict, especially in the Middle East."
“Risks are intensifying which could push up energy prices,” warned Gourinchas.
The WEO's publication comes a day after the IMF and World Bank Annual Meetings got underway in Washington, bringing together finance ministers and central bankers from around the world for meetings on the health of the global economy.
Among the officials in Washington is Argentina’s Economy Minister Luis Caputo, who will attend a series of meetings with investors and officials from NGOs and business groups.
He will address the Council on Foreign Relations (CFR) at midday on Tuesday, but the main focus of the trip is talks with top IMF officials.
Caputo hopes to meet IMF Managing Director Kristalina Georgieva or her deputy Gita Gopinath while in Washington.
Regional outlooks
The United States, the world's largest economy, is now expected to grow by 2.8 percent this year.
“We are close” to a soft landing for the US economy, Gourinchas said – meaning control of inflation without recession.
In Europe, growth is still trending higher, but remains low by historical standards, and is on track to be at an anaemic 0.8 percent this year, rising slightly to 1.2 percent in 2025.
The Fund expects the growth in economic output in China to continue to cool, easing from 5.2 percent last year to 4.8 percent this year, and then falling further to 4.5 percent in 2025.
The slowdown in India looks set to be more pronounced, with the IMF pencilling in growth of 7.0 percent this year, down from 8.2 percent in 2023. It is then set to slow even further to 6.5 percent, as the "pent-up demand accumulated during the pandemic" runs out, the IMF said.
The IMF expects growth in the Middle East and Central Asia to pick up slightly to 2.4 percent this year, before jumping to 3.9 percent in 2025 as the temporary effect of oil and shipping disruptions fade.
And in Sub-Saharan Africa, the IMF predicts that growth will remain unchanged at 3.6 percent this year, rising to 4.2 percent in 2025 as weather shocks abate and supply constraints ease.
Latin America and the Caribbean follows the general trend: economic growth of 2.1 percent in 2024, before picking up to 2.5 percent in 2025.
By 2024, Brazil is expected to grow by three percent, Mexico 1.5 percent, Colombia 1.6 percent, Chile 2.5 percent, Peru three percent, Ecuador 0.3 percent, Venezuela three percent, Bolivia 1.6 percent, Paraguay 3.8 percent and Uruguay 3.2 percent.
– TIMES/AFP/NA
