The World Bank forecasts that Argentina’s growth will fall to 2.6% this year

RIO DE JANEIRO, BRAZIL – The World Bank estimated that Argentina’s economy would grow 2.6% this year, as private consumption “eases due to the reduction of fiscal stimulus and investment declines”.

Although the Argentine GDP will decelerate in 2022 compared to the previous year, “the continued impact of the strong growth of 2021 resulted in an improved forecast for 2022″, highlighted the financial organization that raised its forecasts of last June.

The Government had estimated an advance of 4% of GDP in the draft National Budget for 2022. The agency calculated that after a 9.9% fall in 2020, Argentina would grow 10% in 2021.

In its “World Economic Outlook” report, released from Washington, the World Bank forecasts that Latin America’s growth will slow to 2.6% in 2022 and 2.7% in 2023, as fiscal and monetary policy tightens, the lag in improvements in labor market conditions continue, and external conditions become less favorable.

“Argentina’s economy is forecast to grow by 2.6% in 2022, higher than previously projected, partially reflecting the carryover effect from solid growth in 2021″.

“The Argentine economy is forecast to grow by 2.6% in 2022, more than previously projected, partially reflecting the carryover effect of the strong growth of 2021″, the report highlighted.

However, with a view to this year’s projections, it warned that “strong inflation” together with “price control policies and restrictions on capital movements” will contribute to “soften investment growth”.

Similarly, he estimated a drop in private consumption due to the “withdrawal of the fiscal stimulus assistance to households” implemented during the pandemic’s peak.

The process of recovery to pre-pandemic Gross Domestic Product (GDP) levels will be uneven in the region and prolonged in some countries, while outbreaks of COVID-19, including those caused by new variants of the virus, “continue to pose a downside risk even in countries with high vaccination rates,” the agency said.

Regarding the region, Latin America and the Caribbean is estimated to grow by 6.7% in 2021 (1.5% more than in the previous projection), driven mainly by favorable external conditions (including commodity prices) and, starting in the second half of the year, by progress in vaccination campaigns -which covered 60% of the population this month compared to 15% at the beginning of July-.

Both employment and labor participation also showed a recovery, even though they still did not reach pre-pandemic levels. According to the World Bank, transfers and government assistance were essential to maintain living standards partially.

“Parts of Argentina, Brazil, Chile, and Paraguay are experiencing their worst droughts in decades, requiring, in some countries, a switch to fossil fuels for energy production instead of hydropower.”

A phenomenon that crossed the region was inflation, which “exceeded central bank targets in most cases” and reflects, according to the report, the rebound in demand, the rise in international food and energy prices, and, in some countries, the effect of devaluation and emission.

On the other hand, it points out that “parts of Argentina, Brazil, Chile, and Paraguay are going through their worst droughts in decades, requiring, in some countries, to switch to fossil fuels to produce energy instead of hydroelectric energies”.

As for the global economy, the report indicated that after the strong rebound recorded in 2021, “it is entering a pronounced slowdown amid new threats from covid-19 variants and rising inflation, debt and income inequality, which could jeopardize the recovery of emerging and developing economies.”

Thus, the World Bank expects global growth to slow markedly, from 5.5% in 2021 to 4.1% in 2022 and 3.2% in 2023, as pent-up demand dissipates and the level of fiscal and monetary support worldwide declines.

The credit agency also warned that the rapid spread of the omicron variant indicates that “the pandemic is likely to continue to affect economic activity in the near term.”

It also noted that the marked slowdown in major economies (such as the United States and China) would weigh on external demand in emerging and developing economies.

“Strong inflation coupled with policies of price controls and restrictions on capital movements will contribute to softening investment growth.”

“At a time when governments in many developing countries lack macroeconomic space to support activity if necessary, renewed bouts of COVID-19, persistent inflationary pressures and supply chain bottlenecks, as well as elevated financial vulnerabilities in many parts of the world, could increase the risk of a hard landing,” he warned.

For World Bank Group President David Malpass, the global economy “is simultaneously facing Covid-19, inflation and policy uncertainty; public spending and monetary policies are entering uncharted territory. Rising inequality and security concerns are particularly detrimental to developing countries.”

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