The big investment banks they have negative expectations for the countryboth for this year and for next. JP Morgan see prices go up to 122% over the course of 2023, with a rebound towards 2024, when they would reach 150%. BNP Paribas estimates that inflation will be 135% this year, and does not rule out the possibility that the Government will reach double-digit monthly inflation, i.e. above 10%.
“THE political credibility is weak and there are losses of monetary control, with risks for prices”, judges Goldman Sachs, which has not used its inflation projections in a report that has been circulated between companies and the market, but rather on the basis of survey data from the Central Bank with economists, who position the CPI at 120% per annum.
The fall of the economy, with a contraction in the middle of the election year, is a coincidence of international investment banks. with different words, come “spoilage” in various variables: fiscal and monetary front, prices and wages.
International reserves arethey’re running out”They warn, while emphasizing that even the government’s price containment policies are not producing positive results.
Worrying is the exchange rate gap between the official dollar and the parallels, which has once again exceeded 100%, in an economy that is described as “fragile”.
international financial analysts they do not ignore the impact of drought. They see tightening import controls, but don’t believe this is a solution to macroeconomic imbalances. According to JP Morgan, it increases “the possibility of a more significant financial blow before the election cycle”. He comes to that description, because he notes that the government is running out of options to find a way out of the current fragility.
“The ratio of central bank liabilities to international reserves and the ratio of remunerated to unremunerated liabilities has worsened,” they note.
The reports describe other reasons for concern. The soybean 3 dollar, which rewards exporters with a settlement of 300 dollars, higher than the official exchange rate (at 215 dollars), will generate a “monetary issue”, which would be around 0.7% of GDP.
banks watch “deterioration of the external balance due to drought and distortions resulting from multiple exchange rates”. They believe it is inevitable that there will be more restrictions on imports. And that these companies defend themselves by raising the prices of the products they already own, faced with the fear of not being able to establish their replacement value.
Achieving goals with the IMF, such as building reserves or reducing the fiscal deficit, sounds like an impossibility according to foreign-based banks. According to his estimates, the quasi-fiscal cost will go to 7.5% of GDP, while the fiscal deficit will exceed 12%. The IMF was promised that this indicator would be close to 8%.
In international markets, there is usually aversion to emerging economies’ fiscal deficits, due to their inability to finance themselves. It is different when such a policy is taken by large and robust economies (US, Japan, most members of the European Union) since they have currencies that can withstand bank runs.
The concern is because “the Treasury continues to depend on funding from the Central Bank (BCRA).” They note that this assistance will amount to 4.6% of GDP.
Although the local stock market fell, shares of Argentine companies (such as YPF) rallied in dollar terms. The same happened with other energy companies. Bank stocks, on the other hand, were less favored.
Source: Clarin
