A major risk insurer projected that Argentina will fall 3.5% in 2024 and recover 4.1% in 2025, although the latter is subject to several conditions.
He Atradius Group projected that economic growth in Latin America will slow down in the remainder of 2024 and that Argentina’s Gross Domestic Product (GDP) will fall 3.5% for the year. By 2025one of the largest credit insurers in the world and shareholder of InSur He expects a rebound for the country, although he highlighted three factors that could put it at risk: the exit from the stocks, the debt with the International Monetary Fund (IMF) and the level of governance.
Through a report, Atradius highlighted the lasting high interest rates globally already political uncertainty as the two factors that put a brake on the economic activity of the region. “Policymaking across the region is increasingly difficult, including minority governments in many countries, democratic backsliding and increasing repression in Central America. Difficult political environments are one of the main impediments to unlocking greater growth potential ”, he assured.
Even so, the work clarified that the slowdown “occurs relatively smoothly” and that “a significant recovery is expected in 2025”, despite the fact that the outlook lags far behind other emerging regions. In the face of said recovery, the promotion of investment was highlighted as an engine that could help reverse the situation.
Projections for Argentina’s GDP
In relation to Argentina, the report projected that real GDP will fall by 3.5% in 2024after a drop of 1.6% in 2023. Although a recovery is expected in the agricultural sector, it will not be enough to compensate for the drop in domestic demand, affected by triple-digit inflation and the fiscal adjustment policies of the “shock ” economic of President Javier Milei.
Atradius highlighted the Government’s achievements in terms of fiscal surplus, deceleration of inflation and increase in reserves, but, on the other hand, he underlined the costs that its measures had on economic activity “with a significant reduction in public spending on infrastructure, which is worrying given the low level of investment in the country“.
The three factors that could put the recovery in check in 2025
The credit insurer He pointed out that exchange controls continue to be an obstacle to attracting foreign investment. “Complete removal of these controls requires official reserves to grow to adequate levels, which will be a challenge given that they are still significantly below those levels. Meanwhile, pressure on reserves will increase as restructured external bonds mature next year and international capital markets remain closed,” he warned.
In parallel, the report stated that Debt renegotiation with the IMF is a necessary condition for the 2025 recovery. “In our base scenario, we expect Argentina to enter a new IMF program, which It will reinforce business and market confidence, allow re-entry into domestic financial markets and strengthen official reserves. This would lay the foundations for a recovery in annual GDP growth, which would reach 4.1% in 2025.“he explained.
Even with that agreement, Atradius warned that Downside risks are significant and include social pressures and governance challenges. “Given that the Argentine Congress is dominated by the opposition, it remains to be seen whether Milei will be able to complement his ‘shock therapy’ with the additional measures necessary for a sustainable economic adjustment,” he concluded.
Source: Ambito
