The seasonally adjusted variation of the Monthly Estimator of the Economic activity (EMAE) in July surprised some private consulting firms, by growing 2.4% compared to June. One of the explanations was less agricultural contraction, which fell 14% year-on-year compared to the average 40% it had registered in the previous three months. The trend, according to analysts, would have continued in August: the direct impact of the drought on activity is beginning to be left behind. Although, in any case, others economic factors They light up as warning signals when projecting the evolution of the economy in the last months of the year.
For example, the General Activity Index that the consulting firm measures Orlando Ferreres, registered an increase of 0.4% year-on-year in August and an increase of 0.4% in the seasonally adjusted measurement versus July. “Looking at the sectors, the impulse coming from extractive activitiesalong with a slowdown in the fall of agriculture, and especially the lower incidence of agriculture during this part of the yearare the main reasons for the positive figure that arises from our estimate,” the firm stated.
In any case, when projecting what may happen in the coming months, they analyzed: “Beyond this rebound, going forward we anticipate a contraction of the economy, affected by the lack of foreign currency, an extremely fragile macroeconomic situation, and uncertainty widespread both in the economic and political spheres.
Along the same lines, LCG stressed that it is difficult for the “recovery recorded in July to be sustained over time.” “The devaluation implemented after PASO had as a correlate a higher nominal value, which erodes the purchasing power of consumers more quickly. In an attempt to reach the general elections competitively, the Government is investing a large package of measures in order to stop the deterioration. In just over three weeks, it announced income supplements or tax relief for the equivalent of 1.02% of GDP. This could sustain consumption levels, but only in the short term. And the effect could be marginal, if part of these higher incomes, mainly those offered to high-income workers in the face of the sum of the minimum exempt from Earnings Income, are not used to purchase (local) goods but to purchase of parallel dollars as a hedge,” the firm detailed.
And they added: “This situation is accompanied by a permanent shortage of foreign currency and an uncertain political scenario that paralyzes investment projects, thus also affecting the level of employment and job creation. In summary, we expect economic activity to accelerate the deterioration heading into the second half of the year, averaging a 3% annual decline through December.”
Beyond the impact of agriculture, other sectors began to show contractions in recent months. This is how they explained it from the consulting firm ACM: “The manufacturing industry contracted in the last two months, a trend that is unlikely to be reversed given the impact of the devaluation in the following month and the greater restrictions on access to foreign currency for imports.”. In this scenario, they projected a drop in the level of activity close to 3% annually.
For their part, Fundación Capital also mentioned that the “economic policy of recent months, added to the increase in uncertainty after the PASO, will generate a deepening of the economic contraction.”
In that sense, a study by the firm mentioned a “higher nominal level” after the devaluation and that the measures announced by the Government will help “moderate the loss of purchasing power, but without compensating for it.”
“Even more, restrictions on the import of goods and services are sharply deepening, while both the rising uncertainty regarding elections, as well as the series of measures that continue to undermine fiscal coffers with their consequent monetary financing, will lead to a new period of exchange tension, with an impact on inflation and activity”, concluded from Fundación Capital, which foresees “a drop of 3.6% in GDP in the last quarter (considering only until December 10), ending the year with a 3% drop in the product and leaving a negative drag of 2.2 points for the activity of 2024.”