The World Bank focuses on the need for fiscal adjustment in Argentina and worsens the recession projection for 2023

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The World Bank focuses on the need for fiscal adjustment in Argentina and worsens the recession projection for 2023

The chief economist of Latin America and the Caribbean, William Maloney, insisted that there must be “disciplined fiscal accounts.” Praise for Latin America for controlling inflation, except for Argentina and Venezuela. They expressed reservations about the future dollarization project.

The World Bank has worsened Argentina’s economic projection for 2023, expects a 2.5% contraction this year increasing it by an additional 0.5 percentage points since the last report. For 2024 it is more optimistic adding half a percentage point and raising the growth of 2.8%.

Regarding the growth prospects of the region, the World Bank updated its forecast and improved projections for Latin America and the Caribbean, which will grow by 2.0% in 2023, slightly more than the 1.4% previously projected, ” but still below all other regions of the world,” the report highlighted.

As in Argentina, along with Haiti, are the countries with the worst forecast for 2023 with a drop of -2.5%. In this way, they are the only two countries in Latin America that will suffer a recession this year.

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The multilateral bank’s chief economist for Latin America, William Maloney, stated today in a press conference held from Washington that Although the country is facing high inflationary levels, they still do not see the danger of hyperinflation. About possible formulas To solve the issue, he indicated that the goal is to achieve a fiscal surplus and maintain disciplined fiscal accounts.

Asked about the alternative to dollarization proposed by Javier Milei although he acknowledged that This can be useful for managing expectations and for natural emission limitation. but also Without tax reform, other distortions and problems will occur.

“Where there is a whole key package of fiscal balance and the creation and promotion of confidence in the government and a serious attitude of the government to control inflation”, he assured. In this regard, he considered that countries such as Brazil and Chile were able to adopt the right measures to reduce inflation and thus reduce the interest of their central banks, unlike Argentina, which has the highest nominal rate in the region, however remains negative. in real terms.

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Expanding on the possible hyperinflation, Maloney continued that “it is too early to talk about hyperinflation, hyperinflation defined as inflation of 50 percent per month, and we have not yet reached that point. “On the other hand, It is fair to continue to emphasize that having disciplined fiscal accounts and a low rate of appropriate monetary growth is absolutely key. to control inflation, and until we control the fiscal accounts there is no choice,” said the economist.

Regional inflation, excluding Argentina and the Bolivarian Republic of Venezuela, was at 4.4 percent, compared to 6.4 percent in OECD member countries and 8.6 percent in Eastern Europe. In most countries in Latin America and the Caribbean, inflation expectations remain under control and the objectives of central banks for 2024 are expected to be met. This successful fight against inflation is, in part, a reflection of external factors: food and fuel prices have fallen from the high levels seen immediately after Russia’s invasion of Ukraine, although the underlying inflation, which lowers these costs, remains constant” maintains the World Bank’s report on inflation.

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The World Bank says that Latin America and the Caribbean have achieved significant improvements in macroeconomic resilience over the past decades and have weathered several post-pandemic crises with relative success. However, according to a new report from the World Bank, growth remains insufficient to reduce poverty and create jobs, while financial restrictions limit the possibility of making the necessary investments.

The World Bank has a loan portfolio of USD 8,920 million in Argentina in 28 projects and this year the country will receive USD 2,005 million according to the strategy agreed by the Government. This debt and the IDB is already equal to 50% of the debts maintained by the country in the IMF.

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