Analyzing the measures announced by the new Economy Minister, Victor Beckerdirector of the Center for Studies of the New Economy (CENE) of the University of Belgrano, highlighted two aspects “positive”, in reference to the cessation of advances from the Central Bank to the National Treasury and the agreement for exporters to advance US$5,000 million. “The first announcement implies attacking one of the sources, not the only one, of the current inflationary process. The second, together with some US$2,000 million from multilateral organizations, gives oxygen to the exhausted coffers of the Central Bank, while the measures that make it possible to improve the result of the trade balance are implemented,” said Beker.
Still, the economist warned: “Facing an inflationary process of the magnitude of the current one, which threatens to reach 100% annually, requires a comprehensive plan, made up of a set of coordinated and simultaneous fiscal, monetary, foreign exchange and income measures. And this for now it does not appear“.
Inflation and the exchange gap problem
From the Sarandí consultancy, meanwhile, they pointed out that “There does not seem to be a firm anti-inflationary program, beyond the good intentions of the macro order.” “Massa’s wrist will be decisive to establish agreements with the private sector, buying time with more agreements to stop inertia,” the report remarked.
In this regard, Sergio Chouza, director of the firm, explained: “The essence of an anti-inflationary program is always macroit is always the ordering of the macroeconomy in an integral sense: fiscal, monetary, financing policy. But today it is impossible to disassociate an integral, comprehensive economic program from an order to gradually resolve the dysfunctionality of the exchange market. Today that is the core of the problem.”
The economist warned that, in this scenario, a “currency gap so high, with a sharp stocks scheme, in the face of any negative shock or any disanchoring of expectations, even if it is external to economic variables, any news will end up in the gap”. “And not from levels that are manageable, or with the ability to have tools to ‘discipline’ these disruptive movements, but without tools and with very high levels,” he assured.
“Then, if a real anti-inflationary plan were made, a path would have to be offered for the ordering of the exchange rate regime, of this regime that is a de facto unfolding. That is the core of the problem,” said Chouza, who concluded: “I understand why a more aggressive decision is not made in this regard, due to the constraints of the context and politics, but this is not going to be more than something that it is designed so that the situation does not spiral and go to levels of very complicated nominal variables”.
The need for a fiscal adjustment
For his part, Eugenio Marí, Chief Economist of the Fundación Libertad y Progreso, pointed out that the measures announced by Massa “they are likely to prevent, in the short term, further economic deterioration.” “This means that inflation does not continue accelerating and that we will not go through a new exchange rate run. Nevertheless, what was announced is far from being a stabilization plan for the Argentine economy or a medium-long-term solution”, he highlighted.
“The underlying problem is an excess of public spending financed with monetary issue. Then, lowering inflation inevitably requires a fiscal adjustment. An order was proposed in this sense, something that Guzmán and Batakis had already announced, but so far without too many concrete measures, except for the confirmation that progress will be made in a greater removal of energy subsidies”, remarked Mari.
In that sense, regarding what may happen in the future, the economist from Libertad y Progreso maintained: “It will be necessary to see if in the next few days measures appear tending to lower fiscal spending. But, if they do not do so and if there is no more decisive progress in reducing the fiscal deficit, doubts about the economic future will quickly return, with the risk of returning to the situation we faced a few weeks ago.”
Source: Ambito
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