Economic activity in November would confirm the good end of the year, but the lack of dollars puts pressure on the accounts

Something similar happened with the construction sector, which rose 8.4% year-on-year in November and 0.4% compared to October. In the agricultural sector, the wheat harvest began in November which, according to estimates by the Buenos Aires Cereal Exchange, ended with a record production of 21.8 million tons. Meanwhile, tax collection during the eleventh month of last year grew 59% year-on-year, above inflation, driven by taxes related to domestic consumption such as VAT, which grew 55.4%.

According to the consultancy EcoGo, In year-on-year terms, activity shows a growth of 7.4% and leaves an accumulated expansion in the year of 9.8%. If this level of activity is maintained in the last month of 2021, growth is confirmed at around 10%.

On the supply side, growth in the economy stands out in November. From the side of imported supply, it grew 6.4% compared to October, recovering from the limitations for payment in the MULC. In year-on-year terms, it represents an increase of 15.6%, double the average for the local economy.

Goods, continued to grow for the seventh consecutive month also in November, according to the EcoGo forecast. In services, the growth of 0.6% monthly and 7.4% year-on-year stand out.

Regarding the covid impact, activity in the month of November is 2.9% above pre-pandemic levels. “The severely affected sectors slowed down their recovery and remain around 6% below pre-pandemic levels. The intermediately affected sectors, driven by industry and construction, are 4.6% above pre-pandemic levels, while the unaffected sectors maintained growth of 1.3% and were 2% above the period pre-pandemic”.

In relation to demand, a growing investment trend would be confirmed. According to the first private estimates, investment would have reached maximums in year-on-year terms in November: a growth of 5.3% and an accumulated growth of 23.9% according to EcoGo.

Consumption is another of the most important upturns on the demand side: although it managed to reach annual highs, hand in hand with the release of activities and the improvement in income due to the increase in employment and real income, consumption started to pick up despite the fact that it is below historical values.

In the sights of 2022

According to their estimates, the sum of the drought and the drop in expected international prices would cause “a decline in exports of US$6.7 billion throughout the year.”

In this context, Eco Go explained that this situation “affects the expectations of the economy in two ways: on the one hand, it reduces the supply of foreign exchange and determines the need to reduce imports (either by restricting quantities or raising their price) and on the other, it reduces economic activity due to the lower quantities exported, transported and marketed”.

According to the analysis, the fall in the supply of foreign currency, keeping the accumulation of reserves unchanged (the goal set by Guzmán for this year of a growth of between US$3,000 and US$4,000 million) “it would imply that the demand for imports should be reduced by such an amount; thus, the payments of external purchases should fall back by over 10% in the year, if only that item would be affected and no additional sources of foreign currency would be obtained”.

“The flip side of the lower volume of the harvest and the greater restriction on imports will be that it will not be possible to sustain the level of activity in December (which is what would leave the drag of 2.5% for 2022),” he argued. .

Eco Go assured that “the greatest impact comes from the difficulty in financing imports in a context of scarcity of dollars”.

In this way, Eco Go projected that “with the new appreciation of the harvest, imports should fall 12% compared to 2021 and 17% compared to the December level.”