The official began his considerations about Argentina by “recognizing that the stabilization plan of the authorities “It has generated better results than we expected.” In this regard, he noted that “we have the first fiscal surplus in more than a decade, reserves are being decisively rebuilt day after day, the Central Bank’s balance sheet is being strengthened and inflation, despite still being high, remains high.” going down faster than we anticipated.”
He also maintained that “these days, we are having active conversations with the (Argentine) authorities.” He recalled that the deputy director of the organization, Gita Gopintah and he were on two separate trips to Buenos Aires in recent weeks and had the opportunity, along with the technical team, to meet with the economic team and the president Javier Millei. The talks continue in the meetings of the meeting that is currently taking place in Washington.
Valdés said that “To build on the progress the country has made so far, we are working to complete the eighth review of the Fund’s ongoing support program. Our discussions focused on policies to improve the quality and durability of fiscal adjustment, which has been known by everyone, and also in “How to better adjust Central Bank policies to continue reducing inflation and rebuild reserves”.
consulted by Ambit on whether the Fund considers that the current exchange rate in Argentina is in balance, “as you know, it is a very difficult exercise in every sense.” But, “what I can say is that it is critical that, in the end, Policies must be consistent and this includes the level of the real exchange rate, which is a result, not a policy, to ensure durability and stability in the accumulation of reserves.
Asked about the change controls noted that “of course, any reconsideration of controls must be carefully considered, taking into account the extent of the imbalances that the economy still has, reserve buffers have to be built and the policy framework strengthened. And he added that “it is not just one, but it is a set of different measures that must be reviewed. Some of them are quite important for growth, and some are less important for growth. The sequence is not trivial in terms of how to review those measures, and we are actively discussing with the authorities about alternatives and better paths.”
Resilience
The manager asserted that the economy of Latin America and the Caribbean has shown “resilient” and highlighted the lower inflation ratesbut stated that It is “urgent to take measures to increase potential growth” region of.
Reviewing the recent evolution of the area, he assessed that “the recovery from the pandemic has been stronger than expected” and attributed. “this resilience partly as a result of countries’ progress in strengthening their macroeconomic frameworks.”
However, the manager pointed out that, given that most economies operate close to their potential, activity in the region has generally moderated in recent quarters. He considered a positive aspect that labor markets have remained resilient and unemployment is still at historically low levels.
In sum and “Due to a weaker external environment and the effect of strict policies to reduce inflation still materializing, we expect growth in Latin America and the Caribbean to moderate further in 2024, slowing from 2.3% in 2023 to 2% this year.” anus”.
Inflation
In relation to anti-inflationary policies, Valdés outlined an optimistic outlook. “Inflation is declining throughout the region and is projected to continue falling in 2024.”thanks to the rapid actions of the region’s central banks and global disinflation trends.”
He considered that as inflationary pressures decreased since mid-2023, the area’s central banks began to reduce interest rates, although he considered that “they continue to be contractive.”
“Our opinion,” he recommended, “is that the easing of monetary policy should continue, although it will be important to carefully calibrate the pace of easing to achieve a balance between lastingly bringing inflation to its target, in the final stretch, and avoiding a undue economic contraction.”
He also raised the need for carry out “a faster (fiscal) consolidation to strengthen public debt”. In this regard he added that “A timely fiscal adjustment will also allow for a faster normalization of monetary policy”.
Reiterating the Fund’s concern about the sustainability of the policies, the manager said “in addition, To be durable, fiscal adjustment must include revenue mobilization and protect key social spending. Maintaining social cohesion should be a centerpiece of fiscal consolidation plans, given the still high levels of poverty and inequality in the region.”
Growth
But, in his opinion, “fiscal policy cannot be the only solution to macroeconomic sustainability and social challenges.” From this point of view, he proposed “the urgency of taking measures to increase potential growth.”
Fund estimates project that The region’s medium-term growth will average around 2%, well below the growth rates of economies in other regions..
For this reason, Valdés considered that “it will be important for countries to identify structural reforms with high benefits for growth and work hard to generate consensus to implement them in a lasting and inclusive way.”
He highlighted that “for most countries in the region, boosting growth will require “strengthen governance and the business environment to raise historically low investment levels.”.
He also estimated that the climate change strategies Comprehensive and well-sequenced investments will be key to driving growth, including through investment in green minerals and energy sectors.
He also stated that the reforms should focus on increase participation rates in a context of slowing population growth and aging, including addressing gender gaps.
To increase productivity, he said it is necessary reduce informality and promote business growth. AND “reducing crime and violence – a serious problem in the region – would also generate substantial social and economic benefits”.
He concluded his speech by noting that “while many countries in the region have demonstrated sound macroeconomic frameworks and managed their economies well in recent years, others face significant macroeconomic imbalances. These countries “They need to implement stronger policies to put their economies on a sustainable path.”.
Source: Ambito
