In this way, the IMF presents a more difficult international context also for Argentina given that the economic prospects of its main trading partners have deteriorated. Although an acceleration in the growth of Brazil for the year, at a (modest) 1.7%, the growth outlook for 2023 was trimmed to 1.1%.
In WEO there is no reference to Argentina and in the last April report of the Fund, the estimated growth was 4% for 2022 and 3% for 2023.
Another of the main applicants for Argentine products is China that would have expansion rates of 3.3% in the current year and 4.6% in 2023at a distance from the 8.1% registered last year.
concussions
The world economy was affected by several “shocks” that were superimposed on an already weakened situation caused by the coronavirus pandemic.
Among them, the Fund points out higher-than-expected inflation around the worldespecially in the United States and major European economies, which triggered tighter financial conditions; a worse-than-anticipated slowdown in China, reflecting COVID19 outbreaks and lockdowns; Y other negative side effects of the war in Ukraine.
The base scenario of the organism considers that growth will slow from 6.1% last year to 3.2% in 2022.
This setback responds to a reduction in household purchases and a more restrictive monetary policy in the United States. Thus, the growth forecast for the main power was reduced by 1.4%.
In China, new lockdowns due to the pandemic and the deepening of the housing crisis have led to growth being revised down to 1.1%. The outlook for Europe was also downgraded due to spillover effects from the war in Ukraine and tighter monetary policy.
On the contrary, global inflation projections have been revised upwards due to increases in food and energy prices, as well as persistent imbalances between supply and demand.
The IMF expects that Inflation reaches 6.6% in advanced economies and 9.5% in emerging markets and developing economies this year. Compared to last April’s estimates, these numbers represent upward revisions of 0.9 and 0.8 percentage points, respectively.
The application of anti-inflationary policies would have a cost in terms of growth for next year. In 2023, world production would rise by just 2.9%.
risks
“Risks to the outlook are tilted overwhelmingly to the downside,” warns the Fund. Among the dangers, he indicates that the war in Ukraine could lead to a sudden cut off of European gas imports from Russia.
He also considers that “Inflation could be more difficult to reduce than expected if labor markets behave more rigidly than expected or inflation expectations become unanchored.”
In turn, tighter global financial conditions could lead to emerging market debt difficulties and in development.
As for China, new outbreaks and lockdowns due to COVID-19, as well as a further escalation of the crisis in the real estate sector could further affect the growth of the Asian power.
Added to all this is the risk of geopolitical fragmentation that could hamper global trade and cooperation.
If all these risks materialize, with a growth in inflation, global growth could slow further, to around 2.6% and 2.0% in 2022 and 2023, respectively, one of the worst performances since 1970.
recommendations
Although the report is addressed to all countries, its recommendations seem to be aimed especially at Argentina:
“Tighter monetary policy will inevitably have real economic costs, but delay will only exacerbate them”poses the organism.
Speaking of spending, the IMF says: “specific fiscal support can help cushion the impact on the most vulnerable” while recalling that there are limits because government budgets are already very tight due to the pandemic.
The organism warns that it is necessary: “an anti-inflationary general macroeconomic policy stance” and to achieve this it will be necessarythat such policies should be offset by increased taxes or reduced public spending. It should be noted that Argentina has a limitation when it comes to raising tax pressure.
It is also noted that the “tighter monetary conditions will affect “financial stabilityand therefore it is necessary “require a judicious use of macro prudential tools” while urging that it is necessary “make reforms to debt resolution frameworks”.
As for policies “to address the specific impacts on energy and food prices” these measures “they should focus on those most affected without distorting prices”, the IMF recommends.
Energy
The report states that the flow of gas from the Russian gas pipeline to Europe has fallen sharply to around 40% from the level of a year ago, what contributed to a sharp increase in the price of gas in June.
Thus, the effects of the war in the main European economies have been more negative than expected, due to higher energy prices.
Foods
“The food crisis worsens”, warns the Fund. Although world food prices have stabilized in recent months, they still remain higher than in 2021 as a result of the war in Ukraine.
It highlights that “export restrictions in several countries have aggravated the increases in world food prices.” Low-income countries, where food accounts for a larger share of consumption, are feeling the impact of this inflation most keenly.
He warns that people in low-income countries “I was already experiencing acute malnutrition” especially in sub-Saharan African countries.
Recession
The current landscape is “extraordinarily uncertain” says the IMF Economic Outlook. Moreover, it maintains that the projections are based on several assumptions, namely:
- no further unexpected reductions in natural gas flows from Russia to the rest of Europe;
- that long-term inflation expectations remain stable;
- and there is no worsening of disorderly adjustments in global financial markets as a result of disinflation and monetary policy tightening.
But, he warns that “there is a significant risk that some or all of these reference values or assumptions will not be met. This explains that “measures of economic uncertainty and concerns regarding an impending recession have increased in recent months.
Furthermore, it is estimated that the probability of a recession starting in the economies of the Group of Seven “It is almost 15%”.
Source: Ambito
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