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WORLD | 29-01-2020 13:45

IMF predicts Argentina's economy will contract by 1.3% in 2020

Fund maintains previous forecast and predicts growth will return in 2021. However, uncertainty over Latin America as a whole led to an interesting omission in the IMF's latest report.

The International Monetary Fund (IMF) has predicted that Argentina's economy will decline by 1.3 percent this year and grow by 1.4 percent in 2021, thus maintaining the forecasts published last October.

According to the Fund, Argentina's economic activity fell by 3.1 percent in 2019, according to the report Perspectives for Latin America and the Caribbean: New Challenges to Growth published on Wednesday.

Addressing debt restructuring talks, Alejandro Werner, the director of the Fund's Western Hemisphere Department, said at a press conference that when President Alberto Fernández's government defines and communicates its economic plan in a comprehensive manner, it will help accelerate expectations of economic recovery in general and of investments in particular.

Werner also confirmed that there will be a meeting between the Fund's managing director, Kristalina Georgieva, and Argentina's Economy Minister Martín Guzmán at the Vatican next week, while a mission team representing the organisation will arrive in Buenos Aires in February to continue talks on the debt.

One of the few pieces of good news for Argentina noted by the multilateral organisation in its report is Brazil's slight improvement: in October it had predicted a two-percent expansion for the South American giant – the IMF now says that could grow to 2.2 percent by 2020.

Uncertainty

Among the challenges facing the region, the Fund said there is strong uncertainty over economic policies in some of Latin America's major countries, which continues to limit growth. For example, uncertainty about the direction of reforms and economic policies in Brazil and Mexico likely contributed to a slowdown in real GDP growth and investment in 2019, the Fund said.

Continued economic rebalancing in stressed economies that experienced sharp declines in capital flows in 2018 to 2019 – such as Argentina and Ecuador – have helped restore internal and external balances, but it has also put a lid on economic growth, the report said. More recently, countries in the region that have experienced severe social tension – nations such as Bolivia, Colombia, Chile and Ecuador – have also affected economic activity.

"Uncertainty about economic policies has also increased in these countries as governments consider different options for economic reforms and policies to make growth more inclusive and to address social demands," the Fund added.

Omission

According to La Nación, IMF officials avoided giving a clear and direct view on Argentina in its latest report with an unusual omission.

The region's third-largest economy used to be the first country mentioned in the section on South American nations. However, this year the paragraph on Argentina disappeared from the report. The first comment offered addressed Brazil, followed by Chile, Colombia, Peru and Venezuela.

"The decision to omit Argentina from the blog was, given the uncertain environment in Argentina and the definitions we expect to be made in the coming weeks, we decided not to update the forecasts this time,” explained Werner in a press conference in Washington.

“These are the forecasts we made in October. We have not modified them. It was a practical decision given the high degree of uncertainty, better to wait, and make a projection with better information," he concluded.

- TIMES/NA

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