During February, the economic activity it grew 0.2% year-on-year and remained unchanged compared to January, to accumulate a rise in the first two months of 1.6% compared to the same period of the previous year. This Tuesday, the INDEC will release the Monthly Estimator of Economic Activity (EMAE) of March and, as anticipated by different private surveys and sectoral data, the trend would continue: it could be seen, they say, a rebound in the monthly comparison and year-on-year growth.
In any case, forward projections are not so optimistic. The thing is it is projected that the impact of the drought on agriculture will be reflected in the second quarter of the yearwhile the acceleration of the inflation will affect consumption levels. Thus, they estimate that activity will close 2023 with a contraction compared to last year.
For example, when analyzing some variables that can be taken into account to forecast the evolution of the level of activity in March, from LCG they pointed out: “Leading industry and construction indicators grew in the order of 3.5% per month (seasonally adjusted) and DGI VAT collection and Credits and Debits, associated with the dynamics of domestic consumption, grew by around 5% per month (seasonally adjusted). In that framework, We expect a rebound in activity that could exceed 1% monthly, consistent with a rise of 1.5% year-on-year”.
For its part, the General Activity Index (IGA) prepared by the consultancy orlando ferreres registered in March a annual expansion of 0.2%, accumulating an improvement of 0.5% in the first quarter. In the seasonally adjusted measurement, meanwhile, a rise of 0.4% was observed compared to February.
“The behavior of the sectors was very heterogeneous: the sector with the highest annual growth in March was Electricity, gas and water (10.9%), caused by the expansion shown by electricity generation during March due to high temperatures. Indeed, CAMMESA registered an annual rise in residential demand of 54.2%, which was accompanied by a 20.4% rise in local generation supported by imports to meet demand”, they pointed out from Ferreres, and added: ” At the other end, the biggest drop is in the Agriculture and Livestock sector (21.4%), which has recorded the sixth consecutive drop, all in double digits, and will face an even stronger drop in the coming months.”
Along the same lines, other analysts estimate that, although activity would have grown 0.5% monthly in March, the first quarter would close with a slight decrease compared to the fourth quarter of last year. And, in addition, it would have suffered in April the impact of the exchange rate turbulence.
Activity: what to expect in the future
Beyond a possible upturn in activity in March, the forecasts for the coming months are not encouraging. “Going forward, the perspective is not good: the second quarter will have to face the bulk of the collapse of agriculture, and macroeconomic conditions show extreme fragility”, they summarized from Ferreres.
“All the engines of economic activity show signs of deterioration. The fall in the purchasing power of families, which could deepen with a inflation on the rise, you will feel in the private consumption, which would fall 1.4% yoy, although with heterogeneity between items. Likewise, investment will also show a drop of 6% yoy, in line with less activity in the construction in the context of high uncertainty, and a lower production and import of durable equipment. For its part, foreign trade, given the severe drought and foreign purchases that will continue to be the adjustment variable, will make no contribution to growth (-0.1 pp). Thus, we estimate a 2.7% drop in GDP in 2023, in a moderate scenario. However, with an increasing exchange rate risk and inflation that shows a floor of 7% per month, a further deterioration in the economy cannot be ruled out”, they stressed for their part from Fundación Capital.
In tune, another market source estimated in this regard: “The deterioration of economic activity would deepen in the remainder of the year. Added to the negative drag on 2022 (-0.3%) will be the full impact of the drought, the shortage of dollars and an inflationary acceleration that will reduce domestic demand. We expect a drop in GDP of at least 3% in 2023”.