This week, the government will face several negative indicators that allow us to see it The brake on the economy is already beginning to be felt.
This Wednesday, INDEC will release trade balance data for January, while Thursday will release the Monthly Estimator of Economic Activity (EMAE) for December.
“This week, INDEC will release data on December activity, which would give a drop of 1.5% due to the poor performance of construction, industry and retail sales”, estimates from the consultancy firm LCG.
And the result of the trade balance for January will also be announced, with a drop in exports close to 10% due to the drought.
“Drought has all the potential to become the scapegoat for a year that promises to be bad. It is seriously ferocious and in recent days frosts have been added. The effects of the drought will be felt in activity level, dollar flow and collections. A year with high inflation and low activity is coming,” says economist Andrés Borenstein.
Data shows that economic activity was negative at the end of 2022.”December GDP will show fourth consecutive month of decline in activity”anticipates Borenstein.
That month, industry contracted 1.2% from November, while construction fell 3.5%. The latest official data showed year-over-year declines of 2.7% and 10.6% in December. In addition, CAME data reflect a 0.8% contraction in retail sales.
“We expect the activity indicator for December to contract by around 1.3% per month without seasonality, which would imply a growth of 1.6% per year, closing the year with an average growth of 5.5% per year during 2022″, says the consultancy firm LCG and clarifies that 3.2 percentage points of the last year’s growth match the statistical drag of 2021.
Even on the foreign trade side, the news is not encouraging. “In this case, we expect January exports to show a modest trend, linked to lower foreign sales of cereals, mainly wheat, which would therefore be around $5 billion total,” says LCG.
This would imply a decline of 9.7% per annum“which shows the first impact of the historic drought that is sweeping the country”.
On the import side, the consultancy indicates that foreign purchases “will continue to be affected by the scarcity of foreign currency and bureaucratic regulations, so we expect them to be around $5.2 billiona decline of 1.4% year-on-year”.
If these predictions come true, the first month of the year would end with a deficit of $200 million versus a surplus of $300 million observed in January 2022.
From Orlando Ferreres y Asociados underline that “a recession scenario is possible for the second quarter of the year”. It refers to the fact that, technically, a “recession” is when there have been two consecutive quarters of bearish activity.
The estimates of Latin Focus, which collects the forecasts of 40 consulting firms, predict a contraction in activity of 0.1% this yearwell below the official estimate of a 2% hike.
Unlike what happened in 2022, this time there will be no statistical brake on GDP growth. This happens because the last quarter of last year was very weak, so GDP expansion will only be linked to what will happen throughout 2023.
With exports weakened by drought, the other big driver of activity consumption will also have limited performance due to lower job creation and little chance of wages exceeding inflation which will be close to 100%.
AQ
Source: Clarin
