IMF cuts estimates for Argentine growth to 2.2 percent
Prediction differs from the Macri administration forecast; country ranks second in regional inflation after Venezuela
The IMF projections for Argentina’s economy released this week diverged widely from President Mauricio Macri’s administration and the Central Banks’ predictions both for GDP growth and inflation. The International Monetary Fund (IMF) had published its Perspectives on the World Economy (WEO) report last Tuesday. While the Argentine Central Bank predicts inflation will reach 17 percent this year, the Fund forecasts that it will reach 21.6 percent and it will start to descend towards 2018. There is a 4.6 percentage point gap between the international organization’s inflation estimates and the Central Banks.
This is the second time that the IMF has changed its inflation estimates. At the beginning of the year, the IMF had predicted that inflation would fall considerably, and would be just a little bit higher than the Central Bank’s inflation estimates for 2017. However, now it is calculating a difference of several points between the two projections.
Although the IMF forecasts that inflation will fall more rapidly in the following year, in 2018, the numbers will continue to be relatively high.
Argentina has the highest inflation in the region after Venezuela (the Fund estimates that Venezuelan inflation will reach 720 percent in 2017, and over 2,000 percent in 2018). It is because of this that the IMF excludes Argentina and Venezuela when it calculates average inflation rates for emerging economies.
GDP growth rate also cut
The IMF also cut its estimates for Argentina’s GDP growth, estimating that it will reach 2.2 percent in 2017, a 1.3 percentage point difference with the 3.5 percent growth estimated by Treasury Minister Nicolas Dujovne. However, despite the predicted drop, the international organisation believed that there were signs that the country’s economy was expanding. The IMF said this was based on an increase in consumption and public investment while private investment and exports start to recover.
Last October, the IMF had estimated that the economy would grow by 2.7 percent and in January that it would grow by 2.4 percent.
In spite of its positive growth numbers, the country will continue running deficits in its current account in relation to its GDP growth. In 2017 it will have a 2.7 percent deficit and in 2018, it will increase to 3.4 percent.
The IMF believes that the unemployment rate will fall from 8.5 percent to 7.4 percent towards the end of 2017, and fall another .1 percentage point in 2018.
The Fund highlighted various positive factors that made the long term economic outlook good for the country. It indicated that Argentina has the third-highest none-conventional shale deposits in the world. But it recognized that the extraction of these resources had been delayed because of the low price in oil, regulatory problems and technological deficiencies.
— Herald with Ámbito