OECD forecasts Argentina's economy will contract 4% this year

The Organisation for Economic Co-operation and Development (OECD) slightly raised its world growth forecast for 2024 on Wednesday but its optimism did not extend to Argentina, where it forecast a harsher contraction of four percent.

In an economic outlook report titled "Turning the Corner," the Paris-based organisation said global gross domestic product would expand by 3.2 percent, compared to 3.1 percent in its previous forecast.

The OECD cited "relatively robust" growth in the United States, Brazil, Britain, India and Indonesia, and raised Russia's GDP growth forecast by 1.1 percentage points to 3.7 percent.

But the OECD slightly lowered the outlook for Germany, Europe's biggest economy, to 0.1 percent growth and said Japan's GDP would shrink by 0.1 percent. 

Argentina's economy, meanwhile, would register a deeper contraction of four percent in 2024, said the intergovernmental organisation. 

“Growth has been relatively robust in many G20 countries including the United States, Brazil, India, Indonesia and the United Kingdom. In contrast, outcomes have remained soft in a few economies, including Germany, and output contracted in Argentina,” it highlighted. 

The OECD said growth in Argentina would bounce back in 2025, improving 3.9 percent.

OECD experts noted that “unemployment has also risen by 0.5 percentage point or more in Argentina,” yet forecast that inflation is “expected to ease throughout 2024 and 2025, but to remain at double digit rates.”

The organisation forecasts an inflation rate of 147.5 percent in Argentina this year, slowing to 46.7 percent in 2025.

Debt shocks

While it raised the world GDP outlook, the OECD sounded the alarm on rising debt, urging governments to make "stronger efforts" to contain spending and raise revenue.

"Decisive fiscal actions are needed to ensure debt sustainability, preserve room for governments to react to future shocks and generate resources to help meet future spending pressures," it said.

"Governments face significant fiscal challenges from higher debt and the additional spending pressures arising from ageing populations, climate change mitigation and adaptation measures, plans to raise defence spending, and the need to finance new reforms," it added.

Global public debt rose to a record US$97 trillion last year, doubling since 2010, according to a United Nations report published in June.

"Without sustained action, future debt burdens will rise significantly further and scope to react to future downside shocks will be increasingly limited," the OECD warned.

"On the revenue side, efforts to eliminate distortive tax expenditures and enhance revenues from indirect, environmental and property taxes are called for in many countries," the organisation said.

Raising taxes on the world's wealthiest people and big businesses has come to the fore in recent years.

– TIMES/AFP