Argentina’s inflation rate is expected to skyrocket to 250.6 percent this year and its economy to shrink more than previously forecast, the OECD said Monday.
The sharp downgrade comes as libertarian new President Javier Milei launches sweeping reforms that have triggered protests in Latin America’s third biggest economy.
“High inflation and sizeable fiscal tightening are projected to result in an output decline in Argentina in 2024 before growth recovers in 2025 as reforms start to take effect,” the OECD said in an update to its world economic outlook report.
The Organisation for Economic Cooperation and Development had forecast average annual inflation of 157.1 percent in its last report in November.
But the OECD said consumer price increases in Argentina and Turkey “accelerated in late 2023, implying a strong carryover effect for average annual inflation in 2024”.
The higher inflation in the two countries stemmed “from loose macroeconomic policy settings in the past”, the report said.
Argentina’s economy is now expected to contract by 2.3 percent this year, compared to 1.3 percent in the OECD’s November forecast.
Milei, a self-styled “anarcho-capitalist”, won a resounding election victory in October, riding a wave of anger over decades of economic crisis in the South American nation.
Milei began his term by devaluing the peso by more than 50 percent, cutting state subsidies for fuel and transport, reducing the number of ministries by half, and scrapping hundreds of rules to deregulate the economy.
His reform package touches on many areas of public and private life, from privatisations to cultural issues, the penal code, divorce and the status of football clubs.
The bill won the “general” approval in principle of the lower house of Congress on Friday.
Last week, IMF chief Kristalina Georgieva praised the Milei government’s “bold actions to restore macroeconomic stability and address long-standing impediments to growth.”
