There are 100 days left before the PASO elections to be held on August 13. The best case scenario for private sector economists is this a minimum of 7% inflation per monthwith a sharp drop in activity and sustained exchange rate tensions.

“The activity level will get worse,” says Sebastián Menescaldi, director of EcoGo. “From now to July, inflation will be 7% at least, even if we do not exclude that it is higher than 7%”.

This view is shared by the rest of the analysts consulted by clarion. “By August, the best possible scenario is 7% inflation, although there may be one month that starts with 6% and another with 8%“, strengthens Lorenzo Sigaut Gravina, director of Equilibra.

“We don’t see a falling inflation scenario in the coming months, today the floor seems to be at 7%. The risks of a worsening of this delicate situation are high” adds María Castiglioni, director of the consultancy firm C&T.

In explaining why the monthly low is 7% for the coming months, analysts focus on the fact that both the official dollar devaluation and the interest rate are already marching at that rate. “If inflation doesn’t rise above 7%, it’s already progress, because if the exchange rate gap doesn’t jump”says Menescaldi.

There is no good news on the business side either. Juan Luis Bour, director of FIEL, points out that in this second quarter, essentially due to the impact of the drought, the year-over-year decline will be 7%.

“In the second semester there will be a 4% drop. It will be difficult for agriculture to recover, the supply of the financial sector will be negative, while there will be a drop in exports and investments and private consumption will slow down,” underlines Bour

“Moving forward, the scenario leaves little room for increased activity: there is no margin for not cutting subsidies or public spending”underlines the FIEL economist.

“With almost zero net reserves, STEP is reached with tense calm and with precarious stability. With a real salary that at best doesn’t lose or break even, there could be more pressure,” says Sigaut Gravina.

“The economy will not suit STEP, at best it will be a little worse than it is today. This speaks to the very complex situation in which the Government finds itself,” she points out.

«The rise in interest rates, the obstacles to imports, the lack of credit and the effect of the drought must be added to the recessionary dynamics that have been underway since September», explains Castiglioni.

“In general terms, primary expenditure will decrease, It will not be a typical election year where they can put a lot of money because everything is crunchy, including the IMF deal“, says Sigaut Gravina.

For Castiglioni, “the financial situation is very unstable and this poses a greater degree of uncertainty than what already existed in the economy. This almost 10-day exchange rate race has slowed down but it is unclear whether the risk has dissipatedreserves continue to decline and central bank liabilities continue to increase”.

Inflation estimates for the year are lapidary: 150% for EcoGo, 140% for FIEL, Equilibra and C&Twith a drop in GDP of between 4 and 5%.

The plan arrives

“The government’s plan is reach the August elections without devaluingA. For this they are asking for funds from the IMF, China, the United States, the BRICs and Lula Da Silva. They’ll go out of their way to get there, but the probability that they do not arrive exists and is not negligible“, says Sigaut Gravina.

“For a relief scenario to happen in the third quarter, it would have to happen a very favorable scenario with the IMF, this is the only bullet leftBour says.

Lest the landscape get even more complicated, the key is to get funding. With the weak performance of the soybean 3 dollar, which contributed less currency than expected, the alternative is for the IMF to contribute new dollars.

For Menescaldi “if the dollars don’t arrive, there could be another jump in the gap. I think there is a chance that the government will introduce changes in the soybean dollar to improve the settlement level. If the central bank continues to lose $120 or $130 million a day, it will have to, because otherwise there is a risk that uncertainty will lead to a more exacerbated outflow of deposits.”

“The panorama of these weeks has been very concentrated on the issue of obtaining dollars in order to be able to deal with Argentina’s reserve problems and no longer have to cut imports”, agrees Juan Luis Bour.

But everything could get worse. “There is another scenario where exchange rate, financial and inflationary pressures are pouring into itas it was at the end of April”, says Castiglioni.

“It cannot be excluded that there is exchange management that is not seen as a generalized devaluation. Minister Sergio Massa has said that he does not devalue, but the management of exchanges could arise, with more differentiated exchange rates for exports and also for imports. I see it as easier than putting more restrictions on dollars,” says Bour.