In the latest Latinfocus, a report compiling international banks’ forecasts on countries, analysts counted for December an official dollar of $347.5against the current $210. In other words, the dollar will rise 65% through the end of the year, or in other words, the peso will be written down by 38%.
Along the same lines, in a paper circulating these days, as estimated by the US bank Wells Fargo Argentina will devalue its official exchange rate to around $340 to the dollar later this year, which means a depreciation of about 40% current levels, as emerging markets economist and currency strategist Brendan McKenna wrote in a note published by the Bloomberg agency.
The entity believes it the government is likely to maintain a steady pace of devaluation until the end of the second quarter.
“The authorities will look slow the depreciation rate ahead of the elections in an attempt to give momentum to the current administration or another candidate from the Frente de Todos coalition,” they indicated,
The recipe is already known. Pre-election exchange rate delay, followed by a post-election devaluation. “Once the next administration is determined, it is expected that currency devaluation could become a more realistic option,” Wells Fargo added. The bank waits an explicit devaluation weight by the end of 2023.
That depreciation could be large enough to carry the type of official exchange at $340 at the end of 2023, they maintain, implying a loss in weight value by about 40% from current levels.
But Wells Fargo analysts go a little further. They say that even after that devaluation, “the currency is likely to be overvalued due to capital controls.”
In its latest staff report, the International Monetary Fund believes the exchange rate is overvalued by between 10 and 25%.
The economy in recession
Along with a sharp devaluation towards the end of the year, the Latinfocus report pointed to a contraction in the economy this year. “Extremely high interest rates and inflation, coupled with declining savings, will hit domestic demand, as will an unfavorable economic environment in the run-up to the October general election. Significant debt, repayment risks and the Pre-election political uncertainty poses downside risks,” the paper said.
Therefore, analysts estimate an average inflation of 98.7% in 2023 and 91.2% in 2024.
As for the level of activity, estimates are around 3%, much more pessimistic than the 0% forecast by the World Bank, as reported on Tuesday.
Source: Clarin
