The Organization for Economic Cooperation and Development (OECD) modified this Tuesday upwards the growth projection of the Argentine Gross Domestic Product (GDP) from 3.6% to 4.4% for the current year, while warned of the global slowdown that will occur next year due to a “massive and historic” energy shock.
After the 10.4% registered in 2021, the body that brings together 38 states forecasts for Argentina a GDP growth of 4.4% in 2022 despite estimating contractions in the third and fourth quarters, according to its latest Economic Outlook report
The figure places Argentina together with Colombia (+8.1%) as one of the fastest growing economies in the region and above the world averagesurpassing other Latin American countries such as Brazil (+2.8%), Peru (+2.6%), Mexico (+2.5%) and Chile (+1.9%).
For 2023, it is estimated that the Argentine GDP will grow 0.5%, with an improvement compared to the 0.4% estimated in September, but 1.4 points behind the mid-year projections.
The path of growth would resume with greater force in 2024, the year in which an expansion of 1.8% is expected
The agency stressed that the agreement with the International Monetary Fund (IMF) “significantly reduced uncertainty about short-term macroeconomic policies,” although it indicated that the country’s external situation remains “fragile.”
Inflation is a problem pointed out by the OECD, and it “is going to weigh on private consumption, taking time to go back.”
Latin America:
Although the prospects in #Latin America ?? ?? ?? ?? ?? ?? ?? for 2022 maintain a positive tone, the outlook is less optimistic for the next 2 years.
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— OECD ➡️ Better Policies for a Better Life (@ocdeenespanol) November 22, 2022
In a chapter dedicated to the country, the report foresees a price increase of 92% at the end of this year with a gradual slowdown to 81.2% in 2023 and 58.8% in 2024.
For the organism, the policy of reducing monetary financing followed by the Minister of Economy, Sergio Massa, “will reduce inflationary pressures in the medium term and the gap between the official and parallel exchange rates, reducing the risks of devaluation”.
“Stabilizing the macroeconomic situation and lowering inflation is crucial to reduce high poverty and social pressures,” he stressed.
Despite the fact that the OECD stressed that the country’s trade links with Russia and Ukraine are minimal, the war also had its impact on global commodity prices.
“Although food exports temporarily benefited from the rise in prices, the higher costs of energy imports worsened the trade balance, as Argentina is a net importer of energy,” the report said.
Similarly, the OECD stated that “capital controls and policy uncertainty will lead to a sharp drop in investment in the second half of 2022, with a modest recovery in 2023 and 2024.”
Meanwhile, the restrictions on the use of foreign currency “will allow reserves to be increased in the short term,” according to the report, but they will remain at a low level due to “high external payment requirements and a ‘crawling’ regime he hit with an overvalued currency.”
Public spending, for its part, will fall both this year and in 2023, “hand in hand with the elimination of fiscal assistance linked to the pandemic and the reduction of energy subsidies”although he considers that compliance with the IMF goals will require a greater cut.
Explaining the risks for the country, the Paris-based body said that these will remain high in 2023 against a background of “high inflation, greater restrictions on imports, low reserves and limited room for fiscal policies.”
However, a gradual rise is expected for the economy from 2024 hand in hand with “the improvement in the macroeconomic situation”, which could be favored if there is greater global demand for commodities.
A gradual rise is expected for the economy from 2024 hand in hand with “the improvement in the macroeconomic situation”.
In this sense, regarding the balance of payments, forecasts an increase in exports of 5% for 2022, 2.1% in 2023 and 3.6% in 2024while imports will expand 17% this year and then fall 1.2% in the coming year and grow by the same magnitude in 2024.
As a recommendation, the report calls for “improving the business environment for the private sector and strengthening competition,” which will increase productivity and exports.
In the same way, he advised to continue with the reduction of subsidies and improve the direction of social transfers, reviewing the tax and retirement regimes.
Beyond the local particularities, The lower growth forecast for Argentina for 2023 is in line with what is forecast by the OECD for the whole worldfacing an energy crisis that he considers to be the worst since the 1970s.
Worldwide
The report foresees a world growth of 3.1% for the end of this year, and for 2023, the advance was revised downward from 2.75% to 2.2%, although a recession is ruled out for the moment.
Then, in 2024, the world economy would rise to 2.7%, a range that, however, will continue to be “unsatisfactory” according to the multilateral organization.
“Growth in 2023 will depend heavily on the major emerging Asian economies, which will account for almost three-quarters of global expansion, with the United States and Europe slowing sharply,” the report explained.
Inflation, the high cost of energy, weak growth in the real purchasing power of households and the drop in confidence are the main reasons that will affect growth.
Inflation, the high cost of energy, weak growth in the real purchasing power of households and the drop in confidence are the main reasons that will affect growth.
Added to this is the tightening of the monetary policy of the main central banks, which increased interest rates to lower inflation.
Rate hikes are, however, emphasized by the OECD as a solution to avoid spiraling prices.
France (+2.6%), USA (+1.8%), Germany (+1.8%) and Japan (+1.6%), are the powers that were most affected this year by the effects of the war.
RussiaMeanwhile, it will fall 3.9% this year, 5.6% next and 0.2% in 2024.
For his part, India will be the country – surpassing China– which will lead the table in 2023 and 2024, with forecast expansions of 5.7% and 6.9%, while the United States will remain practically stagnant with projected growth of 0.5% and 1%.
Meanwhile, the OECD predicts that both Germany (-0.3%) as United Kingdom (-0.4%) will enter a recession in 2023.
In respect of Latin Americathe report noted that “major economies performed better than expected in 2022” as they benefited from “better terms of trade,” but the rebound is expected to “lose steam” in 2023 and 2024.
