An economist predicted the end of inflation but made a warning about tensions in the exchange rate

The economist Esteban Domecq He spoke in him Congress We are SMEsdeveloped in La Rural. There he made an economic projection until October and He affirmed that inflation will disappearalthough he warned that the process will not be linear, and anticipated possible tensions in the exchange rate before the legislative elections.

“The dollar remained in the lower zone and there are still complications to accumulate reservations. It also worries Many sectors that begin to suffer the low exchange rate, “the specialist began.

Esteban Domecq about inflation: ends but there would be tensions in the exchange rate

At the beginning, Domecq recalled that the Argentine economy has not been growing since 2011 and that the last decades were marked by macroeconomic instability and persistent fiscal indiscipline. This combination, he said, resulted in a financing via monetary emission that ended with an interannual inflation of 300%.

According to the economist, the government of Javier Milei Face the challenge of ordering the economy in An unfavorable international context For emerging countries, with international prices at the lowest levels of the last 25 years.

Then he said that the current economic program is based on four pillars, and that the most solid is the prosecutor: “There was an adjustment of the expenditure of 30%, which has sequelae in consumption, in public works and construction. But the fiscal deficit was closed, this leg is firm”

The second leg, he said, is financial standardization. In that sense, he recalled that Milei assumed his management with a country risk in 2,000 basic points and that he lowered it to 700.

“However, Argentina is not yet a credit subject (…) You have to reach 300 points for that (…) That’s why IMP put a tourniquet With the loan of US $ 12,000 million in April, ”he explained.

The third leg, he said, is the sanitation of the BCRA. “Net reserves during the start of the government of Alberto Fernández They were positive at US $ 11,000 million, and delivered them negative at US $ 11,500 million. Milei’s management managed to take them to zero, but in March we reached negative at US $ 11,000 million. There, again, The IMF arrived to make another tourniquete to the leg”He said.

The fourth leg is the exchange policy, where the currency had a strong appreciation from the initial devaluation of December 2023. “In November 2023, Argentina was given in terms of exchange competitiveness (…) In 2023 there was a record of historical sale throughout the Argentine border,” he said.

Towards that line, he added that “we had a dollar of macroeconomic explosion. Then the stabilization and Now we have a dollar that starts to sanitizebut there are some prices of the economy that did not fall at the same rate to which the dollar fell. ”

Prices, Crawling PE and inflation that “will disappear”

About prices, it said items like clothing and technology that were the ones who retreated the most in relation to the elevated levels that had reached until 2023.

“In April the fixed exchange rate of the CRAWLING PEG to one of controlled administration exchange rate. The gap closed, the BCRA stopped losing reservations and there was little impact on inflation. It was a resounding success the change”He said, about the change of model adopted with the new program with the IMF.

Expoefi 2023 Esteban Domecq

In terms of prices there are items such as clothing and technology that were the ones that retreated the most.

Then he said that the stabilization process is like a soccer match with two times. “The first challenge was to uncover the pressure cooker and accommodate relative prices. This was a resounding success, because a nominally disruptive event was avoided“, said.

And he pointed out that inflation of May 1.5% has to go to zero, But along the way there are still regulated servicessuch as rates, fees of health schools and services, which fight.

“Inflation in Argentina is going to disappear. Almost 30 years later than the rest of the countries in the region, it will be achieved to end inflation. The question is how that process will occur. I think it will not be linear, that there will be irregularities along the way And movements in the exchange scheme, but sooner or later we cross the puddle, ”he said.

Finally, he also noted that the real interest rate will be kept high until October. “There is little space, or null, so that the rates fall from here to October. It is a pain point in this context for companies, ”he said.