Indeed, the foreign debt operated by Cambiemos from 2016 produced a strong exposure on the part of Argentina to international markets, making it highly dependent on international financing. Specifically, for this year, the country will have to face a increase in debt payment commitments externalthen according to the Finance Secretarya net return to the IMF of Special Drawing Rights for almost 750 million dollars, interest payments with this organization for almost 3,500 million dollars, and interest on restructured bonds for another 4,000 million dollars. All this, together with the need to increase the stock of reserves by 4,800 million dollars above the 44,588 million at the end of 2022.
According to UNM, the dynamics of economic growth world has deteriorated considerablyboth for advanced and developing economies”, which is linked to the conflict between Russia and Ukraine, which triggered energy and food prices, the strong rise in inflation in the world, and the successive increases in interest rates by the main central banks to attack inflationall of which “reduces the rate of expansion of aggregate demand, where Latin America will be one of the regions with the greatest slowdown in world growth and with the lowest growth rate”. To these factors, they add in another section of the reportoutbreaks of COVID-19 in China and the closure in the main cities of that country, all of which drastically reduced Chinese domestic demand, with negative consequences on the demand for goods worldwide.
Also from the consultant ecolatin they maintain that “the external front will present greater difficulties this year”. To develop this conclusion, they explain, in line with what was evaluated by the UNMthat the prospects for the world economy for 2023 are not auspicious, because in part due to the struggle to lower inflation, the policies of high rates may add to the slowdown in global growth.
The role of commodities
One of the elements that played favorably for Argentina and a large part of the region in the last three years was the sustained rise in commoditieswhich caused an improvement in the terms of trade and higher trade surpluses and/or import capacity.
This element also made it possible to face external financial commitments with greater solvency, although the cycle of increases seems to be coming to an end. According to ecolatinunlike the previous year, it is expected a moderation with respect to the prices of commodities, with “international prices that will not compensate for the lower volumes expected for the harvest as a result of the drought”, adding that the “Soybean dollar 2” would leave less product to sell in 2023in addition to generating retention incentives until new benefits.
But also the consultant balance point out that “the grain and energy futures market points to a slowdown in prices”where the dynamics that the market shows futures is similar between wheat, corn and soybeans, with some price stability it would occur during the first half of 2023, to then fall on average 6% in December 2023mainly due to lower global demand, beyond the fact that, they add, this situation could be moderated for eventual rebound in economic activity in China.
In a broader scenario, the Report of the UNM adds that the world monetary policy of high rates to combat inflation is causing a dollar appreciation process in the worldwith the consequent impact on the value of commodities and currencies of emerging markets.
Likewise, they add that the flows of funds towards the emerging markets remained in very important levels during the first stage of COVID-19, since the countries borrowed in the international markets to make up for the sharp drop in the level of activity, but, nevertheless, “from the end of 2021 the flows begin to decrease drastically when the Federal Reserve begins with its policy of withdrawing stimuli” (quantitative tightening).
Source: Ambito
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