As the policy goes In 2023 with the elections as the central axis, the economic variables are aligned stagflation, the scenario that combines stagnation with steep price hikes and further complicates the government’s ability to add votes.
The scenario of the brake on the economy that was comingto profiling init is the last months went one step further last week, when INDEC incorporated the official numbers into private estimates. Although 2022 closed with an expansion of economic activity of 5.2%, in the last year there was a drop of 1.8%.
This leaves the beginning of 2023 in an opposite scenario to that of last year: while much of the growth in 2022 was the consequence of the statistical drag of 3.2% left by 2021, the legacy fallen to 2023 is fully recessive : a delay of 1.4%.
This has led the consultants to recalculate their estimates and put stagflation center stage. This phenomenon combines two negative factors for the economy: the stagnation of activity with the increase in inflation .
“INDEC reported that December was fourth consecutive month of decline; and if the terrible first quarter of 2023 is confirmed, we will officially enter a recession, indeed, stagflation”pointed out the consulting firm FMyA.
“The 2022 GDP left a negative brake of 1.4% for 2023, and with a probable recession starting from the first quarter. With this negative brake, the drought (decline of 25%) and the continued restriction of imports , GDP in 2023 would now drop by 2%. With the risk of a major recession,” says FMyA.
The consulting firm Ecolatina anticipates the round numbers for the presidential year: 0% growth, 100% inflation.
The consultant points out that one of the main factors that will have a negative impact on GDP will be “the decline in agricultural production volumes due to drought and frost (early and late)”.
The drought will not only affect agricultural production, but also other related elements, such as the food industry, transport, agricultural machinery, fertilizers and agrochemicals.
Few margins of action
This means that the Government “will continue to be constrained by the limited margins of implementation action a restrictive economic policy (positive real interest rates, cuts in primary spending)in a context of evident reality limits for expansive deviations within the framework of the objectives agreed with the IMF”.
Moreover, the management scheme for rare currencies will be maintainedthey will continue where import controls will continue (or even increase), placing a limit on the potential expansion of production and consumption, through complications in the supply of inputs and final goods.
The data already known for this year are not encouraging. Of According to the Industrial Production Index (IPI) of the Orlando Ferreres y Asociados (OJF) study, in January the sector grew by 2.9% compared to the same month last year, but in seasonally adjusted measure recorded a contraction of 1.5% compared to December.
“For the next few months, our baseline scenario anticipates a downward path for the march of industrial activity, affected by lower domestic demand, lack of foreign exchange and a very fragile and politically uncertain macroeconomic environment,” they said in OJF.
The toughest forecast so far is from consultancy firm EcoGo, which forecasts for this year a 3.1% drop in GDP, with inflation until November of 105%. “We calculate it until November because we don’t know what will happen in December,” said Sebastián Menescaldi, director of consultancy, referring to the presidential elections.
EcoGo’s explanation of why its estimates are more negative than those of its peers refers to “droughtthe shortage of dollars and the vulnerability of Argentina before the external scenario and debt commitments. With all this, to which we must add the political scenario, we expect a decline in the level of activity and inflation that will not slow down,” said Menescaldi.
The economist clarified that the estimated 3.1% collapse of the product”does not anticipate financial disruption“, so that if that happened the figures would be even worse.
AQ
Source: Clarin
