IMF estimates annual inflation at 30.5% for Argentina and sees the local crisis as a cause of declining global growth

The International Monetary Fund (IMF) has estimated that the Argentine economy is expected to shrink by 1.2% in 2019 with an inflation rate of 30.5%, which is why it believed it was essential for the economy to grow. achieve the zero deficit this year "in order to boost investor and investor confidence.

In its report on the outlook for the global economy presented today in Washington before the IMF and World Bank Spring Meetings, the agency has slightly improved the performance outlook for the world economy. Argentine economy.

Last October, it had estimated an economic contraction of 1.6% of gross domestic product (GDP), while in the text published today, the decline was reduced to -1.2% and that for 2020 , a way out of the recession was expected. 2.2% growth.

On the price side, the IMF has raised its inflation forecast by 10 points to 30.5% this year. During the same period, he estimated a price increase of 20.2% in December (December). from 2019 to December 2018).

As for inflation in 2018, it was estimated at 47.6%.

"Inflation expectations remain high as Argentina adjusts to a new anchor regime in a renewed monetary framework," said the IMF, calling the process "temporary effect" remarkable".

Regarding the level of activity, "Argentina's economy is expected to contract in the first half of 2019 due to slowing domestic demand, due to stricter policy aimed at reducing imbalances, and that it will resume in the second half of the year as real disposable income and agricultural production recover, following the drought of last year, "said # 39; agency.

For the IMF, "higher nominal wages and upward inflation expectations will generate more persistent inflationary pressures in 2019 compared to those projected in the WEO of October 2018". Meanwhile, unemployment would rise to 9.9% this year, compared to 9.2% estimated in 2018.

Similarly, the entity that runs Christine Lagarde expects a current account deficit of 2% for 2019, which is expected to widen to 2.5% next year.

The IMF warned that "the risks to the economy remain considerable" and that its "materialization could result in a change in investor preferences relative to peso-denominated badets and put pressure on the currency and the money market". capital "argentine.

In this context, the agency recommended that "the continued implementation of the stabilization plan as part of the IMF-supported economic reform program is crucial to enhance investor confidence and restore sustainable growth that raises everyone's standard of living. " segments of society ".

To this end, "it is essential to meet the target of a primary fiscal balance of zero in 2019 and 1% of GDP by 2020 to reduce financing needs and avoid reigniting tensions on liquidity. "he said.

"The continued achievement of monetary objectives will be crucial in re-anchoring inflation expectations and restoring the credibility of the Central Bank," the IMF said, adding that "the resumption of the structural reform agenda" was necessary in the country.

The local crisis, one of the causes of the least global growth

The IMF warned of a slowdown in the global economy in 2019 and projected growth of 3.3% for all economies, while the rise was estimated at 3.5% there is six months.

At the same time, for the Latin America region, GDP growth is estimated at 1.4%, according to the report of World Economic Outlook (WEO) for its acronym in Washington this morning.

According to the IMF, after reaching a growth peak of 4% in 2017, the global economy has slowed down for the second year in a row.

As a result, the latest report's forecasts have been adjusted downward from what was expected a year ago when "economic activity accelerated in all regions and provided for growth. 3.9% for 2018 and 2019 ", He remembered the organization.

However, the IMF said today, "a year later, many things have changed: trade tensions between China and the United States, macroeconomic tensions in Argentina and Turkey, interruptions in the automotive sector in Germany, the most stringent credit policies in the world ". China and the tightening of monetary policy in the major advanced economies have contributed significantly to slowing the pace of global expansion, especially in the second half of 2018, "he added.

This is also reflected in the "loss of confidence of businesses and consumers" in the euro area, in a climate that is rarefied by the difficulties faced by Great Britain in channeling Brexit.

Therefore, "the WEO predicts a 70% drop in the global economy" for this year, said the fund, warning against the impact of rising interest rates to states And in other advanced economies, "which converge towards long-term potential".

In Latin America, the Fund has estimated that "growth will resume over the next two years, reaching 1.4% in 2019 and 2.4% in 2020". In Brazil in particular, it forecast a recovery of 1.1% of GDP in 2018, 2.1% in 2019 and 2.5% in 2020.

In Mexico, the economy also slowed, so that the estimated growth of its economy was moderate to 1.6% in 2019 and 1.9% in 2020, one point less than in each period, which estimated last October.

For its part, the Fund estimated that "Argentina's economy would contract in the first half of 2019, as domestic demand slows as a result of tighter imbalance reduction policies, and then resumes in the second half of the year. the year, as real disposable income and agricultural production recovered after the recent drought ".

Finally, he predicted a collapse of the Venezuelan economy by 25% in 2019 and an additional 10% by 2020, "a bigger collapse than expected in the WEO of October 2018".

However, the economic estimates for 2020 and the medium term were more favorable for the region, partly because of the expected recovery in Argentina. For the next period, "we expect a growth of 2.4% in Latin America, while" in the medium term, it should reach 2.8%, "he predicted.

For the IMF, "the financial stabilization and recovery in Argentina, where growth is expected to grow by about 3.5 percent in the medium term (2024), is helping to boost growth in this region," he said. he declares. The report.

Every six months, the IMF prepares economic projections of the progress of the world economy and of the countries in particular, which are presented in the days leading up to the IMF and World Bank annual and spring meetings.