Data of a decline in economic activity of 1.9% in the fourth quarter of 2023 compared to the previous quarter showed that The contraction of gross domestic product last year was 1.6%. This result contrasts with the 5% growth recorded in 2022.
The data reported by the National Institute of Statistics and Census is also decreasing 1.4% compared to the same period of the previous year. While the cycle trend showed a change of -0.1%.
Among the reasons that explain the negative numbers in the last period of the year are economic uncertainty – the presidential elections have taken place -, growing inflation, devaluation and obstacles to the import of production inputs which have strongly penalized the sector . But one of the aspects that most influenced the performance of the activity during 2023 was the severity Drought which affected the countryside, the main export complex of the country and, therefore, suffered the influx of foreign currency.
According to official data, Among the 17 sectors that make up the GDP, eight recorded a decline at the activity level. Among the most notable are, agriculture, down 20.2%; financial activity, 3.7%; the sector as a whole, 2.1%. construction, -1.1% and trade recorded average declines of 0.5%.
As the statistics agency explains, “in seasonally adjusted terms, compared to the third quarter of 2023, imports decreased by 9.9%, private consumption recorded a decline of 1.5%, public consumption decreased had a negative variation of 4.7%, exports grew by 5.7% and gross fixed investments recorded a decrease of 10.8%”.
However, if the comparison is made On an annual basis, exports decreased by 6.3%. In this regard, as the consultancy firm ACM explains, “the fixed exchange rate and the uncertainty resulting from electoral competition, they increased the exchange rate gap between the parallel and official exchange rates, exacerbating devaluation expectations and curbing exports in that period.
For this year, the results so far, nor did they change the negative trend in the activity level. Economists who expressed their opinion in the Market Expectations Survey (REM) of the Central Bank (BCRA) estimate that in 2024 the economy will contract by 3.5%.
So far, several indicators show sharp declines in activity in the first months of the year, amid a severe fiscal adjustment undertaken by the Government.
This was indicated, for example, by a recent survey by the Union of Industrialists (UIA) relating to the month of January The level of industry contraction was the lowest in the series with a decrease of 6.9 points compared to the same month last year. This indicator has been declining for almost two years.
According to ACM, the seasonally adjusted decline in activity of 1.9% in the last quarter “generates a negative statistical carryover of 1 percentage point by 2024.
Furthermore, according to its analysts, “the initial policies adopted by the new government to correct macroeconomic imbalances, including the realignment of relative prices and the marked adjustment of the exchange rate in December, exacerbate the inflationary trend and suggest the continuation of the economic contraction at least until the first half of 2024.”, they warned in their latest report.
According to the consultancy firm, signs of contraction are seen on both the supply and demand sides: The decline in real wages and the lack of fiscal impulse reinforce the decline in consumption, while the inflationary context disrupts investment decisions in a landscape of uncertainty.”
However, without adverse weather conditions, crop normalization could revive exports and partially mitigate the expected decline, ACM Outlook revealed. According to this consultancy firm, the decline in economic activity this year will be between 2.8% and 3.2% on average.
Among other factors to consider this year, economists say that if inflation manages to stabilize in the single digits towards the second half of the year, there could also begin to be a recovery in GDP in that period.
Source: Clarin
