Argentina’s next government should assess the "effectiveness of social spending and other reforms" in order to boost economic growth, the Organisation for Economic Cooperation and Development (OECD) recommended on Wednesday.
The assessment, published in a new report by the OECD issued less than two weeks before libertarian president-elect Javier Milei takes office, also foresees that inflation will reach 124 percent this year before soaring to 157.1 percent in 2024.
The Paris-based international organisation, which Argentina has applied to join, said that consumer prices would not fall substantially until 2025, predicting an annual rate of 62.4 percent.
The OECD, which slightly downgraded its annual 2023 global growth forecast to 2.9 percent, said that Argentina’s economy would contract by 1.8 percent this year, by 1.3 percent in 2024 and would bounce back to growth of 1.9 percent only the following year.
"The Argentine economy is facing extreme challenges at the moment," OECD chief economist Clare Lombardelli said at a press conference, highlighting runaway inflation and "high" poverty rates.
Asked about Milei's plans for the economy, among them dollarisation, Lombardelli assured that the "priority" of the new government must be "to reduce inflation and increase macroeconomic stability.”
"We expect them to focus on macroeconomic stability, on fiscal consolidation to rebalance the economy and to think about the efficiency of social spending and other reforms they can make to increase growth," she added.
The report notes that "increasing social protection through more effective social spending could help reduce poverty and inequality." But it also warns that "the need to reduce public spending relatively quickly amid growing social pressures could lead to political instability.”
The OECD also advocates greater participation of women in the world of work to reduce poverty and boost economic expansion.