Activity fell in June for the fourth consecutive month and contracted 1.9% in the first semester compared to the same period of the previous year. The impact of the drought was reflected in the evolution of the EMAE in recent months, while going forward the effects of the devaluation and higher estimated inflation will affect the economy.
When analyzing the evolution of activity in recent months, from the ACM consultant pointed out: “What is evident in economic activity is explained by the drag of the agricultural sector, which presents a strong seasonality in what is the second quarter of the year. Without going any further, agricultural activity has discounted 4 points of the product in the second quarter. Additionally, other key sectors of activity such as manufacturing industry contracted in Junea trend that will probably continue for the remainder of the year.”
In this context, from the firm they projected: “We hope that this dynamic continues in such a way that it implies a contraction in activity of close to 3% per year, thus maintaining our estimates regarding economic activity.”
Along the same lines, from the consultancy orlando ferreres pointed to Ambit who project a 3% drop in the level of activity for this year.
Meanwhile, since GCL they analyzed: “The devaluation implemented post-PASO will be correlated with a higher nominal value, which will erode purchasing power even faster, impacting consumption. Likewise, said correction added to the current restrictions on imports will depress the demand for external inputs and, therefore, industrial and commercial activity. On this juncture an uncertain political scenario is mounted that paralyzes investment projects, thus also affecting the level of employment and job creation.
“In summary, we expect economic activity to accelerate the deterioration in the second half of the yearaveraging a 3.4% annual drop to December”, they highlighted.
On the impact that the devaluation could have on the activity, from balance analyzed: “After the post-Paso 2019 devaluation, the level of activity fell by almost 4% in seasonally adjusted terms between July and the end of that year. If something similar happens, GDP will fall by an average of 3.0% in 2023 (pre-PASO we expected an annual contraction of 2.5%)”.
“The second quarter of the year closed with an annual drop of 4.4%. We expect this trend to deepen in the third and fourth quarters of the year, with drops in GDP that would reach up to 5% per year. We would be talking about the worst contraction since 2009 (excluding 2020) ”, he explained to Ámbito Eugenio Mari, Chief Economist of the Freedom and Progress Foundation.
“The growth engines are off; the production hit by the scarcity of inputs, the problems of competitiveness and the lack of financing. Consumption has suffered from the drop in purchasing power; investment is stagnant due to the exchange rate and high uncertainty; while on the external front the drought has generated a negative shock for activity”, added the economist.
And he concluded: “For its part, GDP per capita would fall in the 6-7% range, reflecting the general impoverishment and the crisis that the economy is going through. The positive is that if the next government advances rapidly in reforms that free up the productive forces of Argentina, then the country could enter a strong recovery phase in the second half of 2024”.