A bank report JP Morgan which estimates a growth of 8.5% in the economy during the third quarter of the year was mentioned by the Minister of Economy, Luis Caputo, who seeks to capitalize on the improvement of the country’s indicators.
The report was also posted by the richest man in the world, Elon Musk, star advisor to the future president of the United States, Donald Trump, and a very good relationship with Javier Milei.
That report places the elimination of the stocks among the country’s “pending challenges”precisely the new objective of Milei and Caputo.
In a scenario of falling country risk and recovery in bond values, JP Morgan praised the Government for its decision to “eliminate the fiscal deficit,” and highlighted that this measure led to “a marked reduction in inflation” and a “next recovery of economic growth.”
This is a working document from one of the main Wall Street banks, where it analyzes the evolution of the main macroeconomic variables and provides its positive forecasts for the short term.
The entity discounts one year of GDP growth in 2025, although it mentions “pending challenges” linked to “disarming capital controls” and “ensuring access to markets.”
“11 months after his inauguration, both real inflation and expectations showed a marked downward trend. Growth is starting to recover from very low levels. The fiscal deficit has essentially disappeared. The real demand for money is increasing, as is credit in local currency. Gross and net reserves are higher, although they are still in negative territory, and the Central Bank’s balance sheet has improved substantially,” the document indicates.
Regarding the outlook for 2025, JP Morgan projects that “growth will revive”, with an expected expansion of 4.4% of GDP next year, with the possibility of higher figures.
“The August data exceeded our expectations and left the average growth rate of the previous three months in positive territory, after nine months in the red,” the report says.
According to the bank, the annualized decline rates in the first two quarters of 2024 had been 8.4% and 6.8%, respectively.
For this reason, he considers the dynamism of the second half of the year “very promising”: “The partial set of high-frequency indicators for September and October is aligned with expectations of sustained expansion in the fourth quarter, which we expect to extend until 2025.”
According to JP Morgan projections, inflation will be 2% in the first quarter of 2025, and will close the year at 25% year-on-year.
The entity highlighted the growth in dollar deposits in the local financial system as a result of money laundering, and explained that this factor is boosting credit.
“Banks are already mediating this growth in liquidity in dollars, and credit has grown 27% since mid-August,” says the report, where it states that the Government’s objective is a “bi-monetary economy” and rules out the “much talked about dollarization.” that dominated the campaign.”
The report estimates that in the first quarter of 2025 the blend dollar will be eliminated for exporters (it derives 20% of exports to the ‘CCL dollar’), but that there will not be a lifting of the stocks, because it considers that the Government “will maintain controls macro-prudential for both the services and capital accounts, given the high sensitivity of services to the appreciation of the real exchange rate, and the stock of dividends trapped in the economy.”
In any case, they project an external surplus of US$ 6.5 billion in 2025, derived mainly from the energy balance (US$ 7 billion positive).
Regarding the fiscal issue (“the genesis of the Great Stagflation that the country showed for years,” according to JP Morgan), the bank praises the adjustment promoted by the Government, but warns of its limitations facing 2025.
“Going forward, the nature of fiscal consolidation will have to change from less spending to more collection, given the less room to continue reducing items,” says the report, which warns that the elimination of the PAIS tax, without its replacement by other taxes or changes in Profits, could imply a red of 2% of GDP.
It also warns about the dynamics of debt in pesos and warns that a pending issue must be “resolved”, associated with the non-computation of interest on these instruments.
According to its estimates, the Government accumulates around 0.9 points of GDP this year in interest capitalized on these bills (Lecaps) that are not considered in the estimate of the deficit.
Source: Ambito
