As the first quarter of the year comes to a close, economists are recalculating downwards their estimates for this year’s decline in GDP. Complications caused by drought, escalating inflation and increased barriers to imports mean that forecasts are nown a contraction in activity of at least 4%.
The toughest forecast is that of the economist Marina Dal Poggetto, director of the consultancy firm EcoGo, the consultancy firm which for the third consecutive year ranked first in the ranking of the best forecasters drawn up by Focus Economics.
“Economy to drop 4 to 5% this year. The drought alone generates two fall points,” said Dal Poggetto. “The short blanket has shrunk again and, despite the magical steps attempted by Minister Sergio Massa, the rabbits appear to have turned into weasels,” says the EcoGo report. , in reference to the Palacio de Hacienda’s tactic of trying to stay afloat by pulling rabbits out of the galley week after week.
Not even the survey of data from the Monthly Activity Estimator -EMAE- has helped to improve the forecasts, which up to six months ago, growth of 0.5% was forecast for this year.according to the Survey of Market Expectations (REM) carried out by the Central Bank.
February’s EMAE posted a 0.2% year-on-year increase. “Even assuming a stable or slightly improving March (as some high-frequency data anticipate), the first quarter would close in the negative and would officially enter a recession“, underlined Fernando Marull, director of the FMyA consultancy firm.
“Starting in April, the drought and the financial turbulence begin to have an impact. The recession deepens. Without another exchange rate shock like last week’s, activity would stabilize somewhat starting in the second half, but it would close 2023 with a drop of 4%”, signed FMyA.
A similar estimate has Guido Lorenzo, director of LCG. “A 4% drop is expected, with 3.5% as the floor”.
The measurement of the Orlando Ferreres y Asociados study recorded in the first quarter in seasonally adjusted terms a contraction of 0.5% compared to the last quarter of last year. “Going forward, the prospects are not good, the second quarter will have to deal with the bulk of the landslide in agriculture and the macroeconomic conditions show extreme fragility”.
If this decline in GDP materialises, it would be the most pronounced since the 9.9% in 2020 caused by the pandemic and isolation measures. Apart from that anomaly, this year will have the steepest slump since 2009when the economy fell by 5.9%, also affected by the drought and in combination with the international financial crisis.
Among the indicators driving this fall in the presidential election year appears “the acceleration of inflation, which has a greater impact on real wages and is drawing up the picture of the business for this year,” LCG portrayed.
“We believe a lower fiscal deficit will exacerbate the crisis. No demand aggregate appears to have a basis for growth in 2023the financial fragility starts to infect the real side and the business will suffer much more than it should have been due to the simple fact of the drought,” said LCG.
INDEC numbers show that economic activity has decreased by 2.1% in the last 6 months. “We expect a decline of about 3% as a baseline. Can it be older? Safe. minor? Unlikely”explained Santiago Manoukian, economist at Ecolatina.
In Ecolatina’s reading, “the conjunction between drought and measures to favor liquidation (soy/agro dollar) or restrict demand (restrictions on imports) is more inflation, less activity and growing uncertainty exacerbating this scenario”.
For Ecolatin “the economy will experience a sharp recession, determined by the direct and indirect impact of the collapse of crops, of greater restrictions on imports, of a deepening of the contractionary trend of fiscal and monetary policy, of a real wage that would fall further and of the reduced margin to apply the incomes policy”.
From Alphacast. Mariano Sánchez Moreno leads a slightly more optimistic projection of a 2.5% drop over the year. But he warns that “we will review these data this week with the numbers closed for April. They will most likely get stale soon, especially considering the 1000 basis point hike in the economic policy rate and core inflation running at a cruising speed of over 7% monthly. Both hit private consumption and investment hard, which drag down the gross product”.
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Source: Clarin
