After the strong adjustment, the monetary contraction and the closing of the first quarter, the question of What type of recovery can the Argentine economy have: in a “V”, “U”, in a pipe or “L”?. From an analysis of the private sector, it is expected that the Argentina “will follow a “U” path”although this process “could transform into a “V””.
This could be achieved “if the economy were quickly favored by the necessary structural reforms so that it can fundamentally recover part of the competitiveness that will be lost due to the process of exchange rate appreciation”says the report Economics GPSwhich is done monthly PwCin its edition No. 107.
Sanitation of public accounts
Furthermore, the report highlights the consolidation of public accounts during the first two months as one of the fundamental pillars for the recovery. “They showed a positive balance, both the primary and the financial result, after the payment of interest on the debt,” the report highlights and specifies that after this interest payment a green of almost 0.2% of GDP was recorded, “something that has not happened since 2011″.
In this sense, it is worth highlighting that the Government has as its flag economic policy financial balance and the president himself Javier Milei He stated in dialogue with the press on more than one occasion that it is a “non-negotiable” objective and included it in the May Pact, words that the report emphasizes.
Is it possible to maintain the adjustment based on liquefaction and reduction of items?
It is also mentioned that the “adjustment based on expenditure liquefactionmainly the social one, as well as the cut of items for public works, the postponement of some payments (for example to CAMMESA) and the reduction of the sending of funds to the provinces, could have limitations for it to last over time.
At the same time, it suggests that to reverse the contractionary effect on aggregate demand that occurred due to the spending adjustment “a shock of confidence is needed for the private sector to boost the economy”.
In that line, PwC refers to the importance of lowering inflation, but adds that “by itself, it may not be enough”, something that more than one economist from the City of Buenos Aires highlights daily and argues that it is necessary “move forward with structural structural reforms -fundamentally tax and in the labor, financial and capital markets– that allow improving the conditions for the private sector to invest“. And they highlight that the fall in aggregate demand due to the fiscal contraction must be “quickly compensated”“to make the dynamics of fiscal adjustment consistent.”
The private sector as a fundamental factor for recovery
“That is why the person who should monitor the expansion of aggregate demand is the private sector, fundamentally through investment,” he highlighted, although he anticipated that this could be delayed, since “it requires structural changes and predictability in the continuity of economic policy“they added.
Additionally, the report states that “there could be a bridge until this happens”. “The value of Argentine assets – particularly Treasury bonds in foreign currency– makes it so that, faced with a context of twin surpluses“Look attractive,” he points out.
It should be noted that the appetite for these investments has recently grown, “which results in foreign currency income, an improvement in their quoted values and a reduction in country risk.” This process, according to PwC, allows for “monetization of the economy” and “generates a wealth effectfacilitating the process of stabilizing inflation, increasing credit and improving conditions for investment.”
“In summary, Although the consolidation of investment requires structural reforms and the implementation of a monetary program that provides predictability in the future, the short-term context could give some air to the economy until this occurs.“concludes the PwC.
Source: Ambito
