OECD Cuts Argentina’s 2026 Growth Forecast as Inflation Bites

Argentina · Economy

The OECD has cut its growth forecast for Argentina, trimming expectations for President Javier Milei’s recovery as a global oil shock complicates the fight against inflation.

In its latest Economic Outlook, titled “Under Pressure,” the Paris-based organization said Argentina’s gross domestic product would grow 2.8% this year, a downgrade of 1.6 percentage points from its previous projection. It was among the larger country revisions in a report that lowered the global outlook on the back of the conflict in the Middle East and higher energy costs. The OECD now expects world growth to slow from 3.4% in 2025 to 2.8% in 2026, warning that the economic fallout from the war involving the United States, Israel and Iran would be felt well beyond any eventual ceasefire, through costlier energy and fertilizer.

For Latin America, the body said the direct hit should be less severe than in Asia or the Gulf, regions more dependent on Middle Eastern energy imports. Even so, its economists cautioned that rising fertilizer prices could eventually feed into higher food-production costs and consumer prices across the region, a particular concern for a major agricultural exporter such as Argentina.

Why the OECD cut Argentina’s growth forecast

The body said growth had weakened recently and that pressure on the exchange rate had exposed persistent macroeconomic vulnerabilities and political uncertainty. It expects investment and exports to drive the expansion, helped by what it called an increasingly favorable environment for business, lighter regulation and a dynamic energy and mining sector. But it cautioned that a broad-based recovery would depend on deeper reforms to strengthen competition and trade. The forecast contrasts with the 5% growth the government penciled into its 2026 budget, a figure most independent economists view as optimistic.

Inflation and the oil shock

The OECD now sees consumer prices ending 2026 around 31%, before easing toward 16% in 2027. It said inflation had strengthened from mid-2025, reaching a monthly rate of 2.6% in April, which slowed the recovery in real wages. Costlier oil has pushed up fuel prices and added to domestic cost pressures, the body said, complicating the government’s effort to consolidate disinflation. It expects price growth to resume its slowdown in the second half of next year, supported by tight monetary policy and continued fiscal discipline.

What the downgrade means for Milei’s program

The revision underscores how external shocks can interrupt a stabilization effort that had made Argentina a regional disinflation story. The OECD credited spending restraint and higher tax revenue with improving the fiscal balance, but said more reforms would be needed to keep public finances on a prudent footing. Argentina is in a multi-year process of seeking OECD membership, with technical reviews under way across more than 20 committees before member states vote on accession. For now, the message is a slower but still-positive 2026, with the pace of recovery tied to reserves, the peso and the path of inflation.