The World Bank worsened its forecast for the Argentine economy for this year and projected that the country will be in recession with a gross product that will fall to -2% in 2023 as a result of drought, Brazil's economic slowdown, shortage of reserves and escalating inflation. It is a sharp drop of 4 points compared to what he predicted in January.
In a report presented on Tuesday, the Washington-based international organization published an update of the projections of the global economy in which it includes its forecasts on the Argentine economy, which will no longer grow this year by 2%, as predicted by the Bank in its January report, but will fall below the line of recession.
The IMF's projections are even more drastic than the most recent ones by the International Monetary Fund, which predicted at the Spring Assembly in April that Argentina would have almost zero growth this year, of just 0.2% in 2023.
In the report released Tuesday, the Bank notes that "Argentina's economy is projected to fall 2% in 2023 and then grow to 2.3% in 2024 as the economy recovers from this year's great drought."
He explains that "the drought has caused declines in the harvests of soybeans and corn, the main export commodities, equivalent to 3% of GDP. The drought has also severely affected wheat production."
It further describes another external factor that adds a negative impact to growth in 2023: "This year's economic slowdown in Brazil, Argentina's main trading partner, will weigh on the country's non-commodity exports."
It also notes that "the resulting shortage of foreign exchange will create difficulties for importers, especially those in non-agricultural industries. In addition, inflation has continued to grow, exceeding 100% annually."
The new projections come as the International Monetary Fund's technical team is negotiating with Economy Minister Sergio Massa and his top officials a "recalibration" of the deal because the government cannot afford the next payments.
The IMF recognizes that the drought has been a factor that hit the country's economy hard and especially the reserves and that is why in the discussion of the program "everything is on the table."
Massa wants the agency to advance the planned disbursements until the end of the year – about US $ 10,000 million – and that he can dispose of a large percentage of the money as a barrier to contain the dollar, which threatens to skyrocket in an election year. The Fund wants to help, and so does the U.S., the largest shareholder. But he is wary of being too flexible with the Argentines because there have already been previous experiences that did not work.
Massa wants to close the negotiation as soon as possible, but the new version of the agreement takes longer than thought. It is estimated that the Economy Ministry will send some officials to Washington next week and Massa may arrive later – possibly on the 18th – for the final stitches and the announcement.
If you advance funds and make any other concessions, the Fund will undoubtedly ask for certain adjustments. In a section of the World Bank report, which warns of the risks of possible social protests in Latin America for different reasons, it mentions that "Argentina, where annual consumer price inflation has increased significantly recently, faces possible policy adjustments in the midst of drought."
The Bank report further notes that global growth has slowed sharply and the risk of financial stress in emerging markets and developing economies (EMDEs) is intensifying, against a backdrop of high global interest rates.
Global growth is expected to slow from 3.1% in 2022 to 2.1% in 2023.
In its survey of different countries in the region, the Bank also projects that Brazil will slow to 1.2% in 2023, with a slight increase to 1.4% in 2024. Mexico's growth rate will be moderate, at 2.5%, in 2023, and will continue to grow by 1.9% in 2024. Colombia's growth is projected to slow to 1.7% in 2023, with an increase to 2% in 2024. Chile will contract by 0.4% in 2023 and 1.8% in 2024. Peru will grow by 2.2% in 2023, with a slight increase to 2.6% in 2024.