“Production will contract by around 3.5% in 2024 (previously 2.75%), although a change of course in activity during the second half of this yearas the obstacles to fiscal consolidation are eased, real wages begin to recover and investment recovers in response to the reforms” according to the report of the International Monetary Fund.
For the IMF, “activity and demand have contracted markedly, although there are early signs that some sectors could be close to bottoming out. Several indicators point towards a possible stabilization of economic activity starting in Aprilincluding improvements in consumer confidence, a rebound in private credit and cement consumption, all against the backdrop of a rebound in agricultural production following last year’s drought.”
Regarding inflation, he estimated that it will continue to decline, to end 2024 at 140% year-on-year and “declining further in the medium term, as demand for pesos recovers from historically low levels.”
“Meanwhile, Reserves are expected to remain unchanged, as less favorable terms of trade are largely offset by higher net capital inflows. “Sustained fiscal and external surpluses in the medium term – backed by strict policies, productivity increases and structural improvements in the energy balance – will strengthen reserves and ensure prospects for access to international markets,” the organization emphasized.
And he added that monetary and exchange policies “they will evolve to strengthen disinflation and safeguard the accumulation of reserves.”
Specifically, “to support the transition to a new monetary regime, the Central Bank will ensure that monetary policy rates move towards positive territory in real terms, while exchange rate policy will become more flexible with the relaxation of capital flow management measures as conditions allow”, according to the Monetary Fund.
In its report, the organization also considered that although the fixed devaluation rate (2% monthly) “has helped anchor inflation, authorities will adjust exchange rate policy over time to move more flexibly to better reflect fundamentals and safeguard further improvement in reserve coverage.”
“After the initial measures to undo exchange restrictions and controls, Authorities remain committed to undoing all capital controls and currency restrictionsstarting with the most distorting measures, including the elimination of the 80/20 preferential export scheme and eliminating the PAIS tax before the end of 2024,” he added.
