At the Ministry of Economy they assure that the conditions exist for consolidate the ongoing disinflation, even when there are setbacks in corrections, Congress, or even tensions in the global economy. Unlike 2018, when Mauricio Macri faced a crisis that found him with appreciated clout, today the Argentine economy is “on a different trajectory,” they explain. “The government has implemented monetary and fiscal adjustment, the currency gap is narrowing, the Central Bank accumulates reserves, there are twin surpluses and currency controls”. In 2018, however, they recall, the Government had just applied the two-year period fiscal gradualism, the price of the dollar fluctuated, stocks did not exist, and there were twin deficits. She was more vulnerable.
The memory of that setback by Macri is like the sentence “he who has been burned with milk sees a cow and cries”. “Here we are not talking about the backwardness of the dollar – the Government immediately corrects – but we are talking about a logical appreciation of the peso after starting from a higher than expected exchange rate from the market.” In December the official dollar went from 380 to 851 dollars.
The Government played in this case by maintaining the rate of increase of the dollar at 2% monthly (crawling peg) to contain the passage to the prices of such devaluation, while at the same time rearranging the rest of the prices, thus increasing the inflation rate, the The competitiveness of the stock market will henceforth depend on domestic inflation and the dollar at a global level. The US currency appreciated by 4% in a month.
This week will be crucial to learn more about the latter when the season begins. IMF spring meeting in Washington. There the organization will publish growth estimates of the main economies of the world and Argentina. Publicly, The organization will once again praise the government’s progress in reducing inflation and the measures taken. in private, will reiterate his observations on the level of the exchange rate and the need to define a roadmap on the exchange rate system despite announcements on Thursday to remove some restrictions and lower the rate. The IMF prefers greater flexibility in exchange rates to cope with macroeconomic fluctuations.
The dollar globally could appreciate more in the coming months. This week IMF chief Kristalina Georgieva praised the world’s central banks do not lower rates to ensure inflation control.
A peso aligned with a stronger dollar will increase the cost of inputs used by local industry. An estimate from the consultancy firm Equilibra says that if the current dynamics are maintained for the rest of the semester (prices of regulated services continue to rise, the dollar increases by 2% monthly, there is a salary cap and inflation remains at ‘8% monthly average), “The real exchange rate would close the first half of the year with a delay of almost 15% compared to the historical average and just over 25% below the balance indicated by the IMF.”
The economic team responds that all these accounts overlook the fact that, unlike other times, the main anchor of the current model is the balance of public accountswhich slows the pace of emissions and the possibility of pesos seeking refuge in the dollar. “The BCRA lowered rates and nothing happened.”
In any case, economists such as Miguel Kiguel and Andrés Borenstein argue that Argentina should cautiously adopt a swap the bands to cushion the impacts and more if the shares are raised. Even if they see the latter for July “and in installments”.
The government is betting on reaching single-digit inflation this month. They say this would help offset the peso’s appreciation and therefore there will not be another devaluation.
“This time it’s different”, economists Ken Rogoff and Carmen Reinhart wrote about 800 years of financial crises. Will it be in Argentina this time? The Government says yes.
Source: Clarin
