Cavallo emphasized that “according to the surveys, inflation is the population’s greatest cause for concern” and pointed out that it is one of the points to which the IMF will pay the most attention for the approval of the goals of the agreement.
“Consequently, it is very difficult to be optimistic about the governance conditions for the two years remaining in Alberto Fernández’s term,” he stressed.
The former official warned that “the economic consequences of the Russian invasion of Ukraine will aggravate the social panorama because they will produce additional increases in the prices of fuel, energy and many imported inputs.”
Cavallo recalled that an inflation rate like the one that would have occurred in February “was only observed at the beginning of the devaluation jumps of January 2016, October 2018 and September 2019”
“The understanding between Minister Guzmán and the IMF technicians contemplates that there will be no devaluation jump, but the adjustment of the exchange rate will have to keep pace with the inflation rate. This means that it will have to go from 2 to 4% per month,” he added.
For Carlos Menem’s former minister, “the inflationary acceleration observed in February is particularly dangerous, because the rate of devaluation will necessarily have to continue to increase and adjustments to gas, electricity and transportation rates are pending.”
Consequently, he considered that “Not only will the inflation hypothesis with which the negotiators of the agreement with the IMF have been working be obsolete, but also the estimate of the market consultants who in January expected rates of 54 to 57% per year for the next 12 months.”
Cavallo criticized the reading of the president, Alberto Fernández, who described as vigorous the rise in GDP of 10.3% that occurred in 2021.
“The same monthly estimator of economic activity with which the increase in GDP is calculated was showing a slight slowdown towards the end of 2021,” he remarked.
Based on this observation, Cavallo emphasized that “the optimism that President Fernández tried to project in his speech before the Legislative Assembly is based on a wrong reading of the indicators of economic activity and does not take into account at all the devastating effect of inflation on the progress of the economy”.
Source: Ambito
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