Beyond the go up of the last days, alternative dollars they remain somewhat calm. What led to the gap narrowed and stood at around 90%, below the maximum peak of close to 120% in April. Although in the run up to elections can be a complex task, sustaining the “stabilized” gap can help maintain levels of private consumption, the main component of GDP. It is that, according to analysts, this can prevent a transfer to prices and accelerate the inflationwhich affects the purchasing power and, therefore, the demand.
Although, of course, there are other factors at play that will impact the levels of economic activity, which in April began to show the direct effects of the drought. This is how he explained it to Ambit Santiago ManoukianHead of Research at Ecolatina: “In conceptual terms, the level of economic activity is challenged mainly on five fronts: the drought, the scarcity of dollars, the impact of inflation on income, the limited margin for an expansive fiscal policy and the effect of electoral uncertainty itself on investment decisions in the real economy”.
“In April we began to see more starkly the direct impacts of drought on agricultural production, but within the framework of marked heterogeneity at the sectoral level: agriculture falls by close to 40% in its activity and with this drags down associated industrial sectors, such as oilseed milling, the production of agrochemicals or agricultural machinery. And also something in transport and communications”, explained the economist.
On the other hand, he highlighted the sectors that continue growingas the oil & gas sector, for example, promoted by Vaca Muerta. “It is also starting to see good performance in lithium mining. And, within the industry, there is an automotive sector that is leading the growth, given that its export profile means that it is not so affected by the obstacles to import. The production of gasoline and diesel is also very good. Beef has a good level of activity, due to the greater slaughter and production in the face of the drought,” Manoukian explained.
Gap and consumption
Another sector, such as servicesis less affected by import restrictions or drought, and also contributes to sustaining the activity level. “Hotels and restaurants, for example, are emblematic cases of that. Where there is a consumption that, although it is weakening at a general level, for the effect of a higher propensity to consumeand a job that does not give up, that demand is maintained,” said Manoukian.
And it is there, in consumption, where keeping the gap “controlled” can play a fundamental role in the future. “This has to do with how much the inflationary acceleration can have an impact on real income, in a context of heterogeneity within the labor market, where the informal sector continues to be the hardest hit,” said the analyst.
“The government’s objective, then, is first to avoid a discreet jump in the official exchange rate between now and the elections. And on the other hand, keep the gap stabilized to avoid a transfer to prices that accelerates inflation and that with that “eats” purchasing power, consumption and activity. Let’s remember that private consumption is 70% of GDP”, added Manoukian.
In this sense, he stressed that “keeping the gap stabilized is an objective, so that it does not impact consumption and demandwhich in some sectors continues to stand, although with heterogeneity”.
“So, continue to use the currency swap with China and trade credit, continue to maximize its use, is highly relevant because, as there is a demand that does not drop abruptly, you need an offer that can accompany it. And that offer depends a lot on how much you can import. And you don’t have dollars. So, to compensate for those $20 billion that does not come in from agricultural exports, maximizing the use of yuan for imports is allowing the Government to sustain the level of economic activity a little more,” he concluded.
In any case, due to the impact of the drought, both Ecolatina and other consultants estimate a drop in activity levels for this year. A contraction that, as reflected in the REM of the BCRA, would be 3%.
Source: Ambito
