While the International Monetary Fund (IMF) had forecast 2.8% growth in Argentina in 2024, it now predicts a recession in Latin America’s third-largest economy as a result of austerity measures imposed by Mila’s ultra-liberal government, which is also struggling in parliament with his reforms, according to an AFP analysis.

According to the IMF’s World Economic Report 2024 Update, Argentina will be the only G20 country in recession in 2024, at -2.8%, a 5.6 percentage point revision from the October estimate, ahead of an expected 5% recovery in 2025. Tuesday.

Peso devalued by more than 50%, inflation over 200%

According to the Washington institution, the reason: “a major policy adjustment that is ongoing to restore macroeconomic stability” in a country that has faced an unprecedented economic crisis, and especially a record inflation of 211% in 2023.

This inflation, according to the Fund, is mainly due to “price realignment and the removal of legal price controls” that existed until now to limit their growth, as well as due to “currency depreciation”.

In December, during the first days of President Javier Milea’s administration, the peso was devalued by more than 50%.

All these measures should “increase inflation in the short term”, taking into account even the average level of inflation in developing countries and developing countries as a whole, according to the IMF.

Early in his presidency, Miley warned of “tough months” in 2024 and “stagflation” (stagnation of economic activity accompanied by high inflation) during the shock therapy phase because, he explained, “when you get the budget in order, it will have a negative impact on economic activity.”

Strict savings, sustained only one year?

In fact, after two consecutive years of growth, Argentina was already on the brink of recession last year, with the National Institute of Statistics forecasting a -1.3% contraction in activity in the first eleven months of 2023.

Argentina’s purchasing power and economic activity were hit almost immediately by devaluation and price liberalization, which led to record inflation in December (25.5%).

“There is no plan B”

The president knows that time is running out, and the patience of the population (with a poverty rate of 40%) is rapidly running out before the first results of stabilizing the economy and controlling inflation are visible.

“This process can take about two years, and it’s true that there is a warning indicator that says it’s difficult to last more than a year,” Miley told the Wall Street Journal a few days ago.

“But there is no plan B,” he insisted, as his economy minister, Luis Caputo, insists on a Herculean target of a “0%” budget deficit in 2024 (from 2.9% in 2023, according to the ministry).

Time is also running out in Parliament, where an ambitious package of deregulatory reforms known as the Omnibus Act is moving slowly, affecting many aspects of public and private life, from privatization to education, culture, self-defense and divorce.

A seriously reduced package of reforms

A large number of provisions (almost 300 of the original 664) have already been removed from the bill during intense negotiations in recent days with parliamentary groups: Miley’s party, La Libertad Avanza, is only the third force in both chambers and forced to compromise. .

The government, which faced a general strike and large-scale demonstrations last Wednesday, in particular scrapped a provision affecting the calculation of pensions and several key tax measures, promising that the adjustment would be reflected elsewhere.

“We’re just going to give ourselves a little more time to negotiate the reforms,” ​​Luis Caputo said.

MPs are due to start considering the first draft of the text on Wednesday, but the debate has already been postponed twice, and on Tuesday some MPs doubted it would start the next day. The only certainty is that it will be extended for a few days.

The finances of the 24 provinces and the distribution of resources between them and the state is a hot topic of debate, and right-wing MP Nicolas Massot, from the largely conciliatory opposition, criticized the executive “which tells us one thing and writes another”. Twitter”, asking him to “change his attitude” and “stop disrespecting MPs”.