In line with the World Bank document, ABECEB also provides a challenging scenario of 2023 for the Argentine economy, with high inflation (80/85% per year vs. 95% in 2022) ea sharp slowdown in growth what is happening from 5.5% in 2022 to about 1% this year.
This stagnation is part of a more unfavorable global context since 2023 is expected to be the year with the lowest growth in the last three decades (after the 2009 subprime crisis and the 2020 pandemic) and a domestic scenario conditioned by the accumulation of imbalances and structural weaknesses, and the political cycle leading up to the presidential election in October.
The economy will a mediocre year, marked by the continuity of the strategy of “management” of the imbalances (but without any solution to the real problems of the economy). This policy of patches upon patches which gave Minister Sergio Massa a relatively good result in 2022 has, as the WB report points out, a clear Achilles heel: inflation that will remain at high levels, conditioned by the forthcoming adjustments in relative prices, high inertia and unmoored expectations in the face of the risks of growing monetary imbalances and a devaluation strategy that cannot afford a further exchange rate lag.
Furthermore, the impact on prices of any upward adjustments of the alternative dollars and the gap cannot be ruled out, in a context of greater uncertainty and volatility.
In terms of economic growth, even though last year was much better than expected (although much worse in terms of inflation), the truth is that the weakening of the wage billconsumption and investment, which began to show in the last part of 2022, will worsen this year, in a context in which the margins for applying expansionary policies to relaunch spending, typical of an election year, are very limited for a government that , at least for now, seems to continue in line with the objective of demonstrating its willingness to achieve the objectives with the IMF and thus avoid destabilizing expectations.
Furthermore, various factors that stimulated demand and activity in 2022, such as the increase in consumption due to the inflationary acceleration, and the growing difficulties in allocating excess pesos in companies, in a context of lack of safe-haven options, or even the sharp increase in the number of hours worked and employment in the informal sector are already giving signs of exhaustion. To these is added the typical more cautious attitude that he tends to assume in election years in the face of the uncertainty that slows down certain consumption and investment choices.
The majors import restrictions taking care of dollars, which will be scarcer than in 2022 due to the expected decline in exports (mostly agricultural due to drought), are also a risk that pushes economic activity down. In other words, Argentines will go to the polls with an economy that barely budges and inflation that won’t stop.
* The author is responsible for Macro of the consulting firm ABECEB
Source: Clarin
