The agency of rate risk Moody’s revised downward its economic projections to Argentinaand the numbers are not encouraging, since, for the rest of the “emerging markets“predicts thatthe growth will remain relatively good in the next 12 to 18 months, despite the difficult global economic environment.
A key point of the update of the risk rating agency is that it warns of volatility in commodity pricessomething that could hinder the slowdown of inflation and lead the organizations that make monetary politics of the emerging markets have more difficulty relax interest rates. This, for Argentina, would be extremely risky. given the state in which the coffers of the Central Bank are (BCRA).
Moody’s view of Argentina
According to the estimates of Moody’seconomic activity will contract by 3.5% this year, while annual inflation will reach an alarming 147%. By the year 2024, a decrease is expected 2.5% in economic activity and an annual inflation that will skyrocket up to a staggering 275%.
The harsh prognosis is clear from the report entitled “Growth resilience with the possibility of high inflation due to the volatility of commodity prices“, in which Moody’s points out that, during the current year, inflation has decreased in Latin America in general, except in the case of Argentina.
The report states: “Except for Argentinathe five economies with inflation targeting in Mexico, Brazil, Peru, Colombia and Chile will experience a slowdown in inflation, which is expected to fall to 6.5% in 2023 and 3.5% in 2024 from 9.3% in 2022“.
However, Moody’s also lowered its growth projections to Colombia and Peru due to the fall in investment. High inflation, more restrictive financial conditions and weak external demandThey will also slow down economic growth in these countries.
The agency had already warned after primary elections that the Argentine economy was expected to continue facing a high volatilitysignificant price and exchange rate pressures, as well as a shortage of foreign currency, which would contribute to persistent credit fragility.
Regarding the market’s response to the results of the primary elections, with the rise of the dollar and government decisions on interest rates and devaluation of the official exchange rate, Moody’s stressed that these factors, along with other challenges such as negative net reserves at the Central Bank and a weak harvest, will continue to exerciseor pressure on economic prospects and financiers of Argentina.
Daniela Valenzuela, general manager of Moody’s Local in Argentina and Uruguay, emphasized the importance of managing the next Argentine government. She pointed out that regardless of the outcome of the electionsthe next government will have to make significant changes in macroeconomic aspects to stabilize key variables such as exchange rate and inflation.
Source: Ambito
