Argentina will be the only G20 country whose economy will contract in 2024 – this is the assessment of the Moody's ratings agency, which predicts a contraction in economic activity of five percent this year.
The new forecast is a doubling of the pessimistic issued by the credit rating, research, and risk analysis firm in November last year, when it saw a 2.5-percent decline during the first year of Javier Milei’s term.
The analysis comes from Moody's Global Macro Outlook, a report prepared by the agency seeking to project the development of the economies of all G20 member states (consisting of 19 nations and the European Union).
After a sharp decline this year, Moody's sees the economy bouncing back in 2025 with three percent growth.
Justifying their analysis and worsened outlook for the calendar year, the agency's experts highlighted recent measures taken from President Javier Milei's government, which Moody's said would "reduce growth and increase inflation in 2024."
In this respect, they forecast a cumulative inflation rate of 280.7 percent for this year, more than twice as much as the 133.5 percent recorded in 2023. In 2025, the consumer price index (CPI) will remain high at around 222.5 percent, forecast the agency.
“Macroeconomic conditions will further deteriorate this year, as the new government implements an austerity agenda designed to correct long-standing fiscal and foreign imbalances in the country,” Moody's’ economists said in its report.
Other measures – including the devaluation, removal of price controls and the regularisation of the energy and transport sectors, as well as “the introduction of a presidential decree requiring wide-ranging economic, administrative and criminal measures, and regulatory changes” – will also keep inflation high.
According to the ratings agency, the measures taken by President Milei “will help ease the pressure on the exchange rate and the country’s public finances, at the expense of greater short-term inflation.”
Economists also forecast a reduction of the fiscal deficit by approximately three percent of the GDP for 2024, which is higher than the goal agreed on with the International Monetary Fund as part of the seventh review of Argentina's US$44.5-billion credit programme.
They estimate “contraction of internal demand (fall of consumption) amid the fiscal and economic adjustment” – a fact already seen in recent figures from the CAME Argentine Medium-Size Enterprises Confederation, which recorded a 27-percent dip in retail sales, with food and medication the main affected sectors.
“Economic performance will largely depend on the Milei administration’s capacity to approve, implement and adhere to a programme of policies which reduces the country’s huge and long-standing fiscal and foreign imbalances”, they assessed.
They also warned that you cannot rule out a potential devaluation which is “more decisive than the two-percent monthly depreciation of the peso the Government has conducted since December.”
On this point, the IMF also recently suggested accelerating the so-called crawling peg to a monthly eight percent.
– TIMES/PERFIL
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