2024-03-04 19:16:00
Argentina will be the only G20 country whose economy will decline during 2024. This was stated by the agency Moody’scon an estimated contraction of 5% of GDPdouble what it had predicted in November of last year, when it predicted a drop of 2.5% during the first year of Javier Milei’s mandate.
These data arise from Global Macro Outlook (Global Macro Panorama, for its translation into Spanish), a report prepared by the rating agency in which it searched project the development of the economy of all the countries that are part of the so-called Group of 20made up of 19 nations and the European Union.
The forecasts of the international risk agency indicated that the Argentine economy would suffer a drop of 5% during 2024with a perspective of 3% recovery for 2025.
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Moody’s highlighted the government’s long-term measures but stated that they will worsen conditions in the short term.
In this sense, they highlighted the economic measures developed by the National Government for the long term, although they assured that, in the short term, “They will reduce growth and increase inflation in 2024.”
In this regard, they predicted an accumulated annual price increase of 280.7% for this year, more than double the 133.5% of 2023. While, in 2025, the Consumer Price Index (CPI) it would be 222.5%.
“Macroeconomic conditions will deteriorate further this year, as the new government implements a austerity agenda designed to correct the country’s long-standing fiscal and external imbalances,” Moody’s economists detailed in the letter.
Among the measures that explain, as detailed, the 5% drop in GDP for this year devaluation is foundthe liberation of price controls in the energy and transport sector y “the introduction of a presidential decree which requires extensive economic, administrative and criminal measures, and regulatory changes“, referencing the DNU 70/2023.
According to the risk agency, the measures taken by Javier Milei “will help alleviate pressures on the exchange rate and the country’s public finances, at the expense of higher short-term inflation.”
At the same time, economists projected a reduction in the fiscal deficit of approximately 3% of GDP by 2024, higher than the goal agreed with the International Monetary Fund as part of the seventh program review with Argentina.
In turn, they estimated a “contraction of domestic demand (fall in consumption) in the midst of fiscal and economic adjustment.” This can already be seen in the recent figures from the Argentine Confederation of Medium Enterprises (CAME)which revealed an abrupt drop of 27% in the index that records retail sales, with food and medicine as the main items affected.
“The economic performance will depend largely on the ability of the Milei administration to approve, implement and adhere to a policy program that reduces the country’s enormous and prolonged fiscal and external imbalances,” they analyzed.
Furthermore, they warned that it cannot be ruled out a possible devaluation “more forceful than the monthly depreciation of 2% of the peso that the Government has carried out since December.” Regarding this point, the IMF recently suggested accelerating the so-called crawling peg at 8% monthly.
RS / LR CP
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