As reported by INDEC on Tuesday, the economic activity It fell 1.4% in November in the seasonally adjusted variation compared to October and contracted 0.9% year-on-year, to accumulate a decrease of 1.3% in the first eleven months of the year. The negative trend in the economy was sustained in December and will deepen throughout 2024, according to different private consulting companies. In fact, some projections already show that the drop this year could be 4%.
The thing is, Although a recovery is expected in the agroindustrial sectorwhich will leave behind the effects of the drought, also They predict a sharp drop in private consumption levels due to inflationary acceleration and loss of purchasing power.
In this regard, the consulting firm ACM indicated after the November data that “Looking ahead to December and the beginning of 2024, activity expectations do not improve”. “The exchange rate correction that occurred in the transfer of command, together with the adjustment of relative prices, will maintain a high inflationary inertia, which translates into a loss of purchasing power and drop in consumption“, they maintained from the firm, where they estimate a drop in GDP of 2.8% for this year.
Meanwhile, from LCG They estimated a decrease of 1.4% for activity in December 2024 compared to the same month of 2023, “consistent with a decrease of 1% average annual”.
“By 2024 we expect another year with a decline in activity from the rearrangement of relative prices (which could take several stages throughout the year) that will imply a marked deterioration in real income. Furthermore, with the Government’s focus on the convergence of public accounts, the fiscal impulse will be limited,” they maintained from the firm, and detailed that “The traction may come from the export side with the post-drought recovery, but it will hardly be able to compensate for all these effects.”
“Specifically, we expect a drop in activity of around 4% of GDP for this year, although with activity rebounding towards the last quarter of the year in a scenario of a successful stabilization program,” they concluded.
For its part, Equilibra estimated that the GDP “Excluding agriculture, it would fall almost 6% in 2024.” In this regard, they projected a recovery in income from “agro currency” for this year of US$14 billion.
Economic activity: impact of the fall in consumption
Private consumption represents the most important component of GDP. In fact, as highlighted by the Argentine Chamber of Commerce and Services (CAC), ““The performance of the Argentine economy and consumption present a similar behavior, which is expressed in interannual variation rates that usually increase or decrease along the same lines.”
And domestic demand, precisely, will be strongly affected by the acceleration of inflation and the fall in purchasing power. Some private projections in fact estimate a contraction in mass consumption of around 7% for this year.
In that sense, Francisco Ritorto, ACM economist, told Ámbito that although “activity sectors with export capacity will probably improve their performance and manage to ‘cushion’ the fall in general activitythe sectors of activity mostly related to the domestic market and durable consumer goods, will be strongly affected by a fall in the purchasing power of wages and worse financing conditions.”
For its part, Santiago Manoukian He highlighted that this year the “stagflationary trend that the economy has been showing since 2011” will deepen. “It is not something new, but we do believe that eventually one could call it ‘stagflationary shock’because we have been living under stagflation for several years. “It’s going to be a strong recession.”he concluded.
Source: Ambito
