IMF sees 2.5% contraction in Argentina in 2023 under impact of severe drought

The International Monetary Fund (IMF) said on Tuesday it now projects Argentina’s economy will contract by 2.5% in 2023, with an inflation rate of around 120% at the end of the year, largely due to a severe drought that has reduced the country’s agricultural output.

“Argentina is facing a very difficult situation, particularly aggravated by the drought, the agricultural drought that it has been suffering for the last year,” IMF Chief Economist Pierre-Olivier Gourinchas told a press conference.

The new forecast for Argentina, a sharp downgrade from April’s projection of 0.2% growth in 2023, contrasts sharply with a slightly improved outlook for global growth according to new projections in the IMF’s Global Economic Outlook.

Gourinchas declined to comment on how the forecasts could affect talks with Argentina over its $44 billion IMF loan program. The Fund said on Sunday that the basis of a deal could be reached in the coming days, as the country’s government unveiled fiscal and currency measures that would effectively devalue the Argentine peso.

IMF Deputy Research Director Petya Koeva-Brooks said the 120% inflation projection would require some moderation of price pressures and the implementation of macroeconomic policies agreed between the IMF and Argentina.