The World Bank warned of a “hard landing” for developing countries and foresees a strong brake for Argentina

WASHINGTON.- The World Bank has warned that the Argentine economy will suffer a severe brake this year when will grow 2.6% – compared to a rebound of close to 10 percent in 2021 – due to a drop in consumption and investment amid a “pronounced slowdown” in the global economy.

The organism released its latest projections and stressed that growth will moderate until 2023, which will contribute to the risk of a “hard landing” in developing economies.

“Following the strong rebound in 2021, the global economy is entering a steep slowdown amid new threats from Covid-19 variants and rising inflation, debt, and income inequality, resulting in it could jeopardize the recovery of emerging and developing economies, “said the report released in Washington.

“The world economy is simultaneously facing Covid-19, inflation, and policy uncertainty; public spending and monetary policies are entering uncharted territory. Rising inequality and security concerns they are particularly damaging to developing countries, ”said David Malpass, president of the World Bank Group, in a statement.

The agency said that in 2021, growth in the Latin American and Caribbean region recovered to 6.7 percent compared to the previous year, driven by favorable external conditions – the increase in the price of raw materials and the decline in the interest rate benefited regional economies – and “various events related to the pandemic.” The advance in vaccination against the coronavirus also allowed a more robust reopening of activities and better management of infections.

The World Bank left a warning for inflation. “Inflation has increased throughout the region, and in most cases it has exceeded the goals set by the central banks. This increase is attributed to consolidating demand associated with economic reopening, rising food and energy prices, weather-related disruptions in electricity production and, in some countries, depreciation of the currency and the strong increases in the money supply ”, he pointed out, in a reference that seemed directed to Argentina, where the Government resorted to monetary financing of the fiscal deficit.

The agency forecasts that regional growth will decline to 2.6% in 2022 and 2.7% in 2023, “as fiscal and monetary policy tightens, the delay in improvements in labor market conditions continue and external conditions become less favorable ”.

Projections indicate that in Argentina “growth will decelerate to 2.6 percent in 2022 as private consumption slows as a result of the reduction in fiscal stimulus and investment declines, although the continued impact of strong growth in 2021 led to an improved forecast for 2022 ″. The bank estimated that the Argentine economy grew 10% compared to 2020.

The work of the multilateral organization also reiterated that inflation in the country is “very high” and remarked that it expects the rise in prices combined with “the current policies of price control and restrictions on capital movements help smooth investment growth ”.

“Private consumption is also expected to slow down, in part due to the reduction of fiscal support related to the pandemic to households ”, adds the work.

The bank said the outlook is exposed to “various deterioration risks,” including “an abrupt increase in the number of COVID-19 cases, financing strains and debt-related stress, and disruptions caused by extreme meteorological events and natural disasters ”.

“The durability of the economic recovery in Latin America and the Caribbean, as elsewhere, depends on controlling the pandemic,” the report noted.

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