The International Monetary Fund (IMF) has downgraded its economic outlook for Argentina, projecting a second consecutive year of negative growth as President Javier Milei implements what the IMF terms a ‘significant policy adjustment.’ The latest World Economic Outlook update, released on Tuesday, anticipates a 2.8% contraction in Argentina’s gross domestic product (GDP) for 2024, following a 1.1% decline in 2023. This revision comes after the IMF initially forecasted a 2.8% growth for the country in 2024 back in October.
The main catalyst for the downward revision, according to the report, is Argentina’s surging inflation, which has driven up the 2024 inflation outlook for emerging markets and developing economies to 8.1%. The IMF highlighted that the forecast revision for the Latin America and Caribbean region in 2024 is a result of Argentina’s negative growth within the context of President Milei’s substantial policy adjustments aimed at restoring macroeconomic stability.
Argentina, grappling with a severe economic crisis due to decades of debt and financial mismanagement, now sees approximately 40% of its population living in poverty. The nation boasts one of the world’s highest annual inflation rates, exceeding 200%, and is expected to accelerate further following President Milei’s government devaluing the peso by over 50% as part of his ‘shock therapy’ reforms to stabilize the faltering economy.
President Milei, a self-described ‘anarcho-capitalist,’ took office in December and swiftly initiated a radical cost-cutting drive to address the economic challenges. The reforms included cutting worker protections, deregulating industries, and reducing energy and transportation subsidies. Despite facing strong criticism and protests from labor unions, Milei has stood firm on his policies, cautioning that tangible results may take time and that the situation could worsen before showing signs of improvement.
