RIO DE JANEIRO, BRAZIL – The World Bank projects economic growth for Argentina of 3.6% for 2022 and 2.3% for the region’s average, in a context where the war between Russia and Ukraine began to affect the post-pandemic recovery.
It was stated on April 7 by the World Bank’s chief economist for Latin America, William Maloney, during a press conference in which he presented the organization’s new regional report entitled “Consolidating the Recovery: Seizing the Opportunities of Green Growth”.
Maloney acknowledged that the crisis unleashed by Russia’s invasion of Ukraine affected growth projections and that the region will grow 0.4% less than the original forecasts.
Looking to the future, the director of the multilateral organization encouraged the implementation of a strong green agenda that will be very positive in the medium term and where the region has “tremendous comparative advantages”.
FORECASTS FOR ARGENTINA
Regarding Argentina’s data, the report specified that a primary fiscal deficit of 2.5% is expected for 2022, in line with the projections of the agreement reached with the International Monetary Fund.
Maloney said that the country has “room” to improve public spending and, at the same time, “great potential” to continue with investments in lithium.
The new World Bank document was presented on Thursday as a prelude to events related to the traditional joint Spring Meetings with the IMF, which will formally start on April 18.
According to the World Bank, “Argentina has 7.2% of GDP in inefficient public spending”, the highest in the region, where at least 4 points are “leaked by transfers” (the path of the money to reach its destination), at least 2 points of GDP in “inflated contracts” and around one point of the product in what is called “inefficient wage bill”, that is when the public sector pays more in some sectors than in the private sector.
FORECASTS FOR THE REGION
As for the region, after a rebound of 6.9% in 2021, GDP is expected to grow 2.3% this year and 2.2% in 2023, with most countries managing to reverse the economic losses they suffered during the pandemic crisis.
However, “these modest projections place regional growth among the lowest in the world at a time when the region faces major uncertainties, such as the possible emergence of new variants of the coronavirus, an increase in inflationary pressure, and the war in Europe, which threatens the global recovery,” the report states.
“We are in a global environment of great uncertainty, which could impact the post-pandemic recovery. However, in the long term, the challenges of climate change will be even more pressing, forcing us to move urgently towards a greener, more inclusive, and productivity-enhancing growth agenda,” Carlos Felipe Jaramillo, World Bank vice president for Latin America and the Caribbean, said in a statement.
As for the economic consequences of the war between Russia and Ukraine, despite the rise in the price of exportable commodities, the World Bank anticipated that “the impact will probably be negative” because the countries are also energy importers.
According to Malloney, Latin America is a “self-absorbed” region, with little external openness, problems in adopting technologies, and low participation in global markets.
The report also pointed out that in the last twenty years, Latin America and the Caribbean countries have lost the equivalent of 1.7% of their annual GDP due to climate-related disasters and warned that some 5.8 million people could fall into extreme poverty in the region by 2030.
They warned that agriculture is likely to be seriously impacted, reducing crop yields in almost all countries. At the same time, the stability of energy generation will be affected by changes in the hydrological cycle.
As for the impact of the latest drought, “agricultural losses are expected to be close to US$3 billion in Brazil, with additional losses in Argentina, Uruguay, and Paraguay”.
With information from Télam
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