Agentina: OECD forecasts growth of 4.4% in 2022 and stagnation in 2023

The Organization for Economic Cooperation and Development (OECD) published this Tuesday the economic outlook and in the chapter dedicated to Argentina it corrected its projections for the remainder of 2022 and the years to come.

GDP GROWTH

For 2022, the OECD estimates GDP growth of 4.4% (3.4% in the last report). In 2023, it will slow down to 0.5% in 2023 and in 2024 it will recover to 1.8%.

INFLATION IN ARGENTINA

Regarding inflation in Argentina, the international organization projected 92.0% for this year, 83.0% for 2023 and 60.0% in 2024. Both the Argentine Government and the International Monetary Fund estimate an inflation of 60.0% by 2023.

“Inflation is expected to remain elevated in 2023, driven by further monetary expansion and ongoing wage negotiations, but gradual disinflation should start during 2023,” the OECD commented.

ARGENTINE EXPORTS

The international organization stated in turn that “export growth will slow down in 2023, partly due to the overvaluation of the currency, but will gradually recover in 2024”.

In that sense, it anticipated a growth of 5.0% for exports this year, 2.1% in 2023, and 3.6% for 2024. Regarding imports, it forecast a rise of 17.0% for the current year, a decrease of 1.2% for 2023 and a rebound of 1.2% for 2024.

PUBLIC SPENDING

The economic outlook also says that “public spending will be reduced during 2022 and 2023, as fiscal aid related to the pandemic is withdrawn and energy subsidies are reduced.” In any case, the report adds that “meeting the IMF‘s objectives will require greater restraint on spending.”

EMPLOYMENT RATE

“The unemployment rate has returned to pre-pandemic levels, reaching 6.9% in the second quarter of 2022, although informality has increased considerably, approaching 38% of the active population,” says the OECD.

ARGUMENTS AND ANALYSIS

The economic outlook published this Tuesday by the OECD in its chapter dedicated to Argentina states: “in a context of high inflation, import restrictions, low international reserves and very limited fiscal space, the risks remain high, which will keep investment and private consumption moderate in 2023.″

On economic management in recent months, the report says that “the combination of temporary measures and strict monetary controls will strengthen foreign exchange reserves in the short term.” However, high external financing needs and a fixed exchange rate regime with an overvalued currency mean that reserves will remain low.

The organization concludes that “structural reforms to boost productivity could reduce imbalances,” while “improving the business environment for the private sector and strengthening competition could open new opportunities to increase productivity and exports.”

With information from Bloomberg Línea