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IMF insists with gloomy forecasts for Argentina’s economy this year and 2016

The International Monetary Fund (IMF) has repeated its forecast of a 0.3% drop in Argentine GDP over the course of 2015, while recommending a devaluation of the Peso and austerity measures in order to stimulate growth in the economy.

In the report Economic Perspectives: The Americas, penned by Western Hemisphere director of the body Alejandro Werner and Roberto Cardarelli, IMF Chile mission chief, the international organization reiterated its gloomy prediction for Argentina’s economy.

Next year, 2016, according to the report, also promises little growth, with an increase of just 0.1% forecast.

“Argentina maintained significant financial imbalances, following an extended period of fiscal expansion which has impacted hard on the financing of the Central Bank,” the IMF claims.

The body adds that restrictions on trade and the exchange market have also created a large gap between the official and black market dollar rates. It is admitted, however, that the gap has stabilized since the end of 2014 between 40 and 50%, with inflation still in double digits but falling.

Looking forward to the future, adverse trading conditions, particularly due to the drop in international soy prices, weak economic activity in Brazil and the strengthening of the Real, according to the report, have generated more unfavorable conditions for growth in the Argentine economy, with a contraction of 0.3% expected for the current year.

While the organization believes that the country’s economic travails are not as extreme as those faced in Venezuela, it affirms that Argentina would need a combination of measures similar to the Caribbean nation, with ”tighter macroeconomic policies, a weaker exchange rate (that is to say, devaluation) and fewer microeconomic distortions in order to lay the foundations for a return to stability and growth.”

The IMF estimates inflation at 23.9% for last year, while projecting a deceleration in price rises to 20.5% for 2015 and 2016. However, a worsening of the fiscal deficit is also predicted, with the current account estimated to be in the red to the tune of 1.7% of GDP this year and 1.8% the following year.

The primary fiscal deficit (without interest payments on debt) is calculated at 1.6% of GDP for 2015, falling to 1.4% the next year.

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MercoPress

MercoPress is an independent news agency started in 1993 which focuses on delivering news related to the Mercosur trade and political bloc, and member countries, covering an area of influence which includes South America, the South Atlantic and insular territories. MercoPress offers an update of the main events which model the Mercosur integration process, the current customs union, its influence on the main players of the region as well as the relations with other economic-political spaces.

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