The start of 2024 brought a slew of bad news for economic activity. According to data from consultancy Invecq, car registrations fell 33.0% in January, retail sales fell 25.5% and construction contracted 28.2% year-on-year. And as Econviews points out, real wages have been recorded a loss of 19% in December, marking the most significant drop in revenue since October 2017
With this eating, all economists predict that the recession will deepen this year, with a drop that would fluctuate between 2.4% and 4.4%depending on how the main economic variables will move in the coming months.
Analysts agree that we are going through the worst time and show nuances about it When will the debacle end?
Econviews see “an improvement in the economy starting from May, first incipient and then more robust. “This is contingent on inflation returning to single digits, which would lead to a recovery in disposable income.” Even so, according to this forecast activity will decline by 2.6% over the course of the year.
María Castiglioni, of C&T Consultores, underlines that “No recovery was seen in either February or March. In April it will help the harvest and all related activities, such as transport and export-related wholesale trade. There will definitely start to be a turning point, but it will be very uneven. In domestic consumption, the recovery will be more delayed than in the tradable sectors.”
To accelerate the pace of recovery, the rise in inventories will be fundamental, a decisive factor in opening the doors to the arrival of investments.
For Castiglioni, “It does not seem unreasonable for exchange rate unification to occur mid-year. “This can encourage some recovery in the sector that requires investments, such as mining, lithium and Vaca Muerta.”
Fernando Marull, director of FMyA, sees two reasons for the economic recovery in the coming months. “First of all salaries, which in February and March begin to beat inflation. Joint ventures will be reorganized at levels above 15% monthly, when inflation is below 15%.”
The second favorable factor that Marull sees is the arrival of the harvest, which will begin to have an impact starting from April and push exports. Even so, the economist estimates a decline in activity of 2.4% for the whole year. “The key to the recovery of activity is consumption and exports, investments are more long-term and I still don’t see a recovery.”
From Abeceb, Elisabet Bacigalupo specifies that for this year amidst the strong adjustment there is hope”a short V-shaped scenario: a deep but not very long recession in which activity bottoms out in the second quarter. Between April and May it should start to reach the ground and turn around. Agriculture will act as a buffer, not just for the sector itself, but because it spills over into inland cities, transportation, services and diesel demand, among others.
But the beneficial effect of agriculture will not be enough to counteract the collapse in domestic demand, which will lead to a contraction of the economy. between 4.1 and 4.3% in 2024, according to Abeceb forecasts. And they warn that without agriculture the decline in GDP would reach 7%.
This scenario assumes that no new disruptive events occur. That is, the government manages to avoid a sudden jump in devaluation which would generate a new wave of inflation.
“The government has room to avoid a new exchange rate rise despite the fact that inflation partially erodes it. What it cannot do is continue to maintain the creeping rate of 2% per month, but the pace can be accelerated without making a new leap,” reinforces the economist.
Even if this prediction comes true, it will be a bad year for the pocket. “It will be difficult for wages to recover, because this recessionary cycle began with very low real wage levels.”says Bacigalupo.
From EcoGo, Sebastián Menescaldi expresses further reservations about the economic recovery.
“In the first quarter we expect a sharp decline in activity, 7.5% year-on-year. In the second the results will be mixed: a decidedly better harvest than last year and the rest of the activity in decline. But we will have to see whether this rebound will be confirmed in the third quarter, because it will depend on the government’s ability to stabilize itself politically and economically. If you can generate expectations, you can rebuild the level of activity.”
For Menescaldi, “The result will be much weaker. V’s recovery would be miraculous. There should be a lot of investment income that I don’t see. I also don’t see there being dollars to unify the exchange rate. The Government managed to significantly improve the Central Bank balance by purchasing dollars and liquefying peso debt. But it cannot be unified with $5 billion in negative reserves and then left to God’s will. We have to generate much more trust or generate a much larger devaluation”.
Nonetheless, Menescaldi underlines that “very positive results are being achieved in the short term. We now need to move from a currency anchor to a fiscal and monetary anchor. This could be done without devaluing, but it is complex. Our business decline is between 3.1% and 4.4% depending on whether or not the economy can be stabilized.”
For Menescaldi, the dollars brought in by the harvest would not be enough to stabilize the economy. “There may be some additional contribution from the mining sector, but having dollars, The only thing left is to reduce imports and this lowers the level of consumption”.
Source: Clarin
