The South American country’s economy is now projected to contract for a second straight year

The International Monetary Fund (IMF) has revised down its economic outlook for Argentina, forecasting a second straight year of negative growth amid President Javier Milei’s push for what the IMF report calls a “significant policy adjustment” in his country.

In its latest World Economic Outlook update on Tuesday, the IMF said that Argentina’s gross domestic product will contract 2.8% this year, following a 1.1% decline in 2023. Back in October, the IMF had projected 2.8% growth for the economy in 2024.

According to the report, Argentina’s inflationary surge was the main driver pushing up the 2024 inflation outlook for emerging markets and developing economies, sending it to 8.1%.

“The [Latin America and Caribbean] forecast revision for 2024 reflects negative growth in Argentina in the context of a significant policy adjustment to restore macroeconomic stability,” the IMF stated.

Latin America’s third-largest economy, Argentina is bearing the brunt of a severe economic crisis after decades of debt and financial mismanagement. An estimated 40% of Argentinians are living in poverty. The nation’s annual inflation rate is among the highest in the world –at over 200%– and is expected to climb faster in the months ahead, after President Javier Milei’s government devalued the peso by over 50% as part of his so-called ‘shock therapy’ reforms to stabilize the ailing economy.

READ MORE: Argentinian workers plan mass protests against Milei’s ‘shock therapy’

Shortly after taking office in December, the self-described ‘anarcho-capitalist’ Milei has embarked on a dramatic cost-cutting drive to turn things around. The reforms slashed worker protections, deregulated industries and cut energy and transportation subsidies, among other things. Despite the harsh criticism and protests by labor unions, Milei has so far stood by his new policies, warning that it will take time for results to be seen and that things could get worse before they get better.

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