IMF improves growth outlook for Argentina's economy

The International Monetary Fund improved its 2021 growth forecast for Argentina on Tuesday, predicting that gross domestic product will rise 7.5 percent this year.

Last June, the IMF had previously predicted that Argentina’s gross domestic product would grow by 6.4 percent this year and by 2.4 percent in 2022, but in its new World Economic Outlook report, the multilateral lender revised those forecasts up to 7.5 percent and 2.5 percent respectively.

Nevertheless, the projections remain below the government’s expectations, which foresee growth of eight percent this year and four percent the following year. The IMF’s predictions reflect that Argentina’s economy will be one of the slowest growing in the region in 2022. 

Regarding inflation and other fiscal variables, the IMF refused to offer forecasts for the 2021-2026 period, stating that they “are to a large extent linked to still-pending programme negotiations.”

On the other hand, the Fund projected that unemployment – which reached 11.6 percent in Argentina 2020 – would fall to 10 percent this year and 9.2 percent in 2022. 

Darkened prospects

Zooming out, the IMF said that the ongoing hit from the Covid-19 pandemic and the failure to distribute vaccines worldwide was worsening the economic divide and darkening prospects for developing nations.

Global economic growth this year and next is expected to continue as the recovery solidifies broadly, but the overall figures mask large downgrades and ongoing struggles for some countries.

"The outlook for the low-income developing country group has darkened considerably due to worsening pandemic dynamics," IMF chief economist Gita Gopinath said.

The setbacks, which she blamed on the "great vaccine divide," will impact the restoration of living standards, and a prolonged pandemic downturn "could reduce global GDP by a cumulative US$5.3 trillion over the next five years," she warned.

Meanwhile, advanced economies face "more difficult near-term prospects... in part due to supply disruptions." 

That threatens to drive prices higher, especially in the United States, where growth this year will be slower than previously anticipated, even taking into consideration massive spending bills, according to the Fund.

Output worldwide is expected to grow 5.9 percent this year, only slightly lower that projected in July, before slowing to 4.9 percent in 2022, the report said.

But the wave of infections from the Delta variant of Covid-19 and the drastically lower vaccination rate in developing nations, along with supply bottlenecks, have slowed or pushed back the recovery in many economies.

"The dangerous divergence in economic prospects across countries remains a major concern," Gopinath said in a blog post on the new forecasts. 

Advanced economies are expected to regain "pre-pandemic trend path in 2022 and exceed it by 0.9 percent in 2024," she said.

However, in emerging markets and developing economies, excluding China, output "is expected to remain 5.5 percent below the pre-pandemic forecast in 2024." 

Amid the danger of long-term scarring, "The foremost policy priority is therefore to vaccinate at least 40 percent of the population in every country by end-2021 and 70 percent by mid-2022," she said.

Large economies

Among the world's biggest economies, the IMF cut its 2021 forecast for the US by a full percentage point to six percent, mainly because of supply constraints, but boosted its 2022 estimate to 5.2 percent from 4.9 percent. 

China will grow at a rate of eight percent this year and 5.6 percent next, both a decline of 0.1 point from July, the Fund said. It raised its projection for the euro area to five percent for this year from 4.6 percent, and kept its 2022 estimate at 4.3 percent. 

Forecasts for Japan, the United Kingdom, Germany and Canada were all cut for this year, but lifted for 2022. Low-income countries were tipped to advance just three percent this year, a slicing of 0.9 point from July. 

The IMF calculated gross domestic product for advanced economies will regain its pre-pandemic level in 2022 and even exceed it by 0.9 percent in 2024. But only two-thirds were seen regaining their earlier employment levels. 

Looking further out, the Fund said if Covid-19 has a prolonged impact, it could reduce global GDP by US$5.3 trillion over the next five years relative to current projections. That could be offset if governments intensify efforts to equalise vaccine access.

– TIMES/NA/AFP/BLOOMBERG