Argentina’s economy faces the prospect of a “hard landing” this year, as the Drought in crops raises expectations of a deeper recessionaccording to a note released Monday by analysts at JPMorgan Chase & Co.
The country’s economy is expected to contract by 1.7% this year versus the bank’s previous forecast of a 0.5% drop.
AND one of the most pessimistic prospects for Argentina. Economists polled by the central bank in January expected 0.5% growth this year, while the government estimated 2% growth in its annual budget.
Diego Pereira and Lucila Barbeito, economists at JPMorgan, predict that the “Stagflation will enter a new phase with diverging inflation and growth trends: higher inflation and declining real growth.
In addition to near 100% annual inflation, a historic crop drought the prospects for exports worsen of key commodities driving activity, tax revenues and central bank reserves.
Pereira and Barbeito estimate that the top three crop exports — soybeans, corn and wheat — could drop to $36.6 billion in shipments this year from $51.6 billion in 2022.
High inflation and worsening crop expectations fuel what economists are saying of “recessive environment”.
Debt in pesos
Regarding the debt in pesos, the bank argues that, although the Treasury is able to obtain financing on the market, had to validate higher ratesup to about 119% annualized, compared to 112% last month.
The next race will take place on Wednesday 22 March. In March, the private sector has maturities of about $737 billion.
At the end of February, the Treasury had about $18 trillion (10.3% of GDP) of local currency debt maturing through the rest of 2023. However, only 4.2% of GDP debt is in the hands of the private sector, while the rest is in the hands of public sector entities (including Banco Nación).
As expected, peso debt maturities continue to pile up before the electionsays JPMorgan. The average maturity of debt in pesos currently stands at 90 days, with the second quarter now concentrating 43% of total maturities for the year (or 4.5% of GDP). Similarly, the third quarter concentrates 50% of the aggregate or 5.1% of GDP.
“We estimate a debt financing requirement in pesos for the rest of the year of 12.9% of GDP. The Treasury has local currency debt maturing in the coming months at around 10.3% of GDP. fiscal deficit of 2.3% of GDP (above the IMF program target of 1.9%) and Treasury dollar purchases at the BCRA of about 0.6% of GDP,” the entity said. financial.
JPMorgan adds that, “on the source side, if there are no IMF program changes, it contemplates $1 trillion in direct monetary financing (0.6% of GDP). In addition, the Treasury has 0 .2% of GDP since the first two months of the year Assuming a 100% refinancing of total debt maturities in pesos in the year, this leaves a funding gap for the remainder of 2023 of 2.1% of GDP.”
This funding gap must be covered by placing net debt in the local market, which would imply a refinancing rate of approximately 120% through the end of the year. Alternatively, the gap should be filled through direct or indirect central bank support.
The BCRA has already repurchased Treasury debt on the secondary market for approximately $350,000 million (0.2% of GDP), which represents almost all of the net financing received in the local currency debt market, the bank says.
Source: Clarin
