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ECONOMY | 04-04-2023 14:50

World Bank lowers forecast to no growth for Argentina in 2023

International financial institution lowers its 2023 growth forecast for Argentina from two percent to zero growth and calls for “macroeconomic stability” in order to boost growth.

The World Bank on Tuesday lowered its 2023 forecast for Argentina, predicting that the country’s economy will record no growth this year.

The updated prediction, a drop of two points from the previous estimate, was accompanied by a call for the country to achieve greater “macroeconomic stability.” 

The institution’s chief economist for Latin America, William Maloney, emphasised that "macroeconomic stability is a prerequisite for increasing the flow of foreign capital and also the economic activity of entrepreneurs.”

"We support the IMF programme and we hope that macroeconomic stability will be guaranteed. There are several loans for this year, as in previous times, and we are working on the social aspects," the official said at a press conference in Washington, referring to Argentina.

Maloney also said the punishing drought impacting the economy reflects "the need to mitigate high temperatures, which have an effect on growth in countries like Argentina.”

The Washington-based organisation projects that the regional economy as a whole will expand 1.4 percent this year, lagging all other regions. It had projected 1.6 percent growth for this year, but consensus growth forecasts in Chile, Argentina and Colombia have worsened since the bank’s last report in October 2022. 

Activity is seen expanding 2.4 percent in each of the following two years, in 2024 and 2025.

The effect of inflation and the war on food and energy prices has “had a significant impact on household poverty,” said Maloney during the press conference. “We are hoping this will be moderated in the next year. We are optimistic that we’ll return to lower levels.”

Identifying regional trends, the official said that there is “a lot of headwind affecting growth because of high interest rates, high inflation and the slowdown in commodity prices.” 

The region’s “central banks are trying to contain inflation with higher interest rates, but this has a harmful medium-term effect on growth and that is why inflationary expectations should be discouraged," added Maloney.

In this regard, he said that Brazil and Chile "are going to stop raising rates. We believe that most countries will comply with this decrease in 2024.”

He also said that the increase in inflation, food prices and energy prices "have produced a significant increase in poverty, which we hope will be mitigated in 2024.”

Maloney also observed that investment flows "have declined since 2011 by 50 percent to the region.”

The economist considered that to boost the growth "that the region so badly needs, countries must preserve their hard-won resilience and take advantage of the unique opportunities offered by trends in the global economy towards business relocation and green industry.”

In the World Bank's view, only Chile’s economy will enter recession this year; Argentina will not grow but other nations in the region, such as Brazil (0.8 percent), Mexico (1.5 percent), Uruguay (1.8 percent), Paraguay (4.8 percent), Bolivia (2.7 percent) and Ecuador (three percent), will record growth.

 

– TIMES/NA

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