International Monetary Fund technicians updated their economic projections for Argentina. The data came out on Monday afternoon, following the disclosure of a staff report that reduced the estimated growth while expecting higher inflation. The IMF paper talks about “high risks” in the face of the coming electiary process and warns that it would “compromise access to finance” as well as “an outflow of investors from peso assets and exchange rate pressures.”
The agency estimated a 1.3 percent drop in GDP for this year and growth of just 1.1 percent by 2020 compared to 2.2 percent forecast a few months ago. With regard to inflation, the Fund acknowledges that it fell, “but still remains high” and estimates for this year 40.2% against the estimated 30.5% a few months ago. And by 2020 he expects 32.1%, a figure still very high.
“This would lead to worsening social outcomes, increased poverty and an erosion of public support for the government’s policy agenda,” the Fund admits.
On unemployment, the report projects a rate of 10% until 2021, when it could fall to 9.8%. “With persistent inflation, real interest rates will need to remain high longer, affecting domestic demand and imports,” the document argues. Debt Sustainability”
IMF technicians find that “high public debt and financing needs, and high sensitivity to market movements, pose debt sustainability risks to Argentina.” They expect public debt relative to GDP to fall to 77% of GDP by the end of 2020 and are projected to fall to 60% in the medium term, reflecting the scheduled fiscal consolidation. However, “these forecasts are subject to risks linked to the exchange rate, interest rates, economic growth and contingent liabilities”. In this note: