The IMF insisted that the country will grow less and talk about "doubts" of investors – 07/23/2018

The International Monetary Fund (IMF) lowered Argentina's economic growth forecast to 0.4% this year and 1.5% for the next, largely because of the important Fiscal adjustment agreed in the financial aid plan after the strong depreciation of the peso in May and June

"Growth in Argentina is expected to become negative in the second and third quarters of 2018" said Alejandro Werner, director of Latin America and the Caribbean, in his updated regional perspectives. Christine Lagarde, director of the IMF, spent the weekend in Buenos Aires at the G20 meeting of ministers with Werner.

Werner explained yesterday that "while drought reduced agricultural harvest, May and June currency pressures weighed on inflation and investor confidence and created Werner also acknowledged "doubts in the full implementation of the program" by investors and companies, according to the newspaper La Nación.

Therefore, Werner said that this growth is expected to "slow down" to 0.4% this year and there will be a "gradual recovery" in 2019 and 2020, supported by "the restoration of confidence in the Fund's stabilization program, in capital lower, lower inflation and strong export demand. "

In April, the body headed by Christine Lagarde had placed Argentina's expansion estimates at 2% for this year and 3.2% thereafter In announcing in June the scope of this agreement with the IMF, the Mauricio Macri administration is committed to developing a program with a deficit of 2.7% of GDP by 2018, sets a target of 1.3% for 2019, the primary balance in 2020 and the budget surplus of 0.5% in 2021.

As reported Clarín on Saturday, the IMF also manages another worst case scenario for the country. There would be a decline of 1.3% in 2018 and a "flat" economy, with 0% growth in 2019.

Also, in a negative scenario, IMF staff imagine a more severe adjustment: the budget deficit in 2019, it is expected to be 0.9% of GDP due to the growth of the economy. "Unfortunately," Fund technicians have presented to the Board, "in this scenario, the lack of funding inevitably makes pro-cyclical policies."

If the economy falls more than expected, the fiscal adjustment needed to "close the model" and the financing will be greater than if the economy develops and that there is more tax resources. What IMF staff mentions is the opposite of the "countercyclical" concept: using fiscal policy to mitigate business fluctuations and mitigate the impact on employment. But Argentina is in a situation so vulnerable that it does not have the countercyclical option at hand and that is why it turned to the IMF .

Mauricio Macri had dinner this weekend with Christine Lagarde and gave him answers on the dollar, the fiscal deficit and inflation.

Restrictions on public investment, the potential reduction in transfers to the provinces, and a larger-than-expected recession could complicate the political situation and the collection Nicolás Dujovne needs.