IMF: Argentina Expected to Grow 4.5% in 2021, Partially Mitigating Pandemic’s Impact

RIO DE JANEIRO, BRAZIL – The International Monetary Fund, IMF, lowered Argentina’s negative growth estimate for 2020 to -4.5% from its previous -4.9% forecast, according to the World Economic Outlook (WEO) published this week and which covers some forty countries, including Argentina since it is a member of G20.

IMF also estimated that the country’s GDP in 2020 contracted 10.4%, while anticipating that in 2021 growth could reach 4.5% next year.

The WEO report also points out that the recovery percentages won’t be enough to mitigate the impact of the pandemic, as in the majority of countries analyzed by the IMF. Two exceptions are China and the US, estimated to expand 8,1% and 5,1% this year respectively, and overcoming the negative impact of the pandemic in 2020.

WEO is published twice a year, normally April and October, with the prospects for different economies. The October edition, this year delayed, coincides with the joint annual spring assemblies of the IMF and World Bank.

However Argentine consultants Orlando Ferreres published this week that the country’s General Activity Index, IGA, registered a 0.4% advance, in December to December, which meant that the overall contraction in 2020 was 8.4%.

The slight hiccups in December was helped with the financial activity, plus a 5% increase in wholesale domestic trade. But manufacturing was down 1.7% in the twelve months, with a significant blow from the cooking oil industry which collapsed 71% because of a prolonged union strike, implemented several days a month.

The slide was also partially compensated by increases in Machinery and Equipment, up 37%; non metallic minerals, up 33,6%; and basic metal, up 20%, mainly because of a strong rebound in construction.

Overall this means that the Argentine economy in 2020 underwent its third consecutive year of contraction, with three sectors particularly below average: construction down 21,6%; mines and quarries down 17.1%; and retail down 10.2%.

Summing up, Ferreres says that the pandemic was particularly damaging for the economy in the first half of last year, but in the last months, particularly the fourth quarter, activity picked up, some 5.1% compared to the previous quarter.

As to this year’s prospects, ”most probably we will notice a sustained period of growth, mainly because of the stats impulse of the last quarter, plus the fact that Argentina’s main trading partners are expected to have an improved performance.”

But much will depend on whether Argentina reaches an agreement with the IMF and a macroeconomic plan, reliable and feasible, which helps with the fiscal consolidation for a sustained recovery, ends the WEO report.