Argentina closes 2024 with several economic changes, as expected with the arrival of a new Government. But what are the prospects and challenges for next year? How can the success of money laundering and current financial stability affect the possibility of more credit for companies and SMEs?
To begin with, it is important to specify that the bleach has injected more dollars into many small and medium-sized businesses through financial instruments that made the funds enter at zero cost.
In this framework, fresh dollars have entered the market in order to be able to finance the SMEs themselves by their shareholders.
On the other hand, to a greater or lesser extent, firms are already beginning to think about taking out loans for productive investment in 2025.
In this context, we mention as data from the real economy that financing to the private sector has been growing significantly, and reaches around 6% of the Gross Domestic Product (GDP).
Although this proportion is very low in regional terms (Brazil and Chile lead with percentages greater than 70% of their respective GDPs), the current growth trend is very positive.
Both the money laundering and the gradual decline in inflation are giving additional impetus to this process of monetization and consequent expansion of credit.
To the extent that inflation expectations decrease, the rise in nominal interest rates will also reduce. This process should generate a decrease in the cost of loans to the private sector, to the extent that the stabilization of fiscal accounts reduces pressure on the financing market. All this will allow the consequent expansion of the arrival of resources to the private sector.
Furthermore, after the country entered recession in 2023 with 2 consecutive quarters of GDP decline, said contractionary process hit its floor between April and June of this year.
In fact, the economy is growing today, although it shows appreciable differences by sector, with a substantial year-on-year improvement in agriculture, which suffered a historic drought last year.
In this context, it is expected that this year will end with a year-on-year reduction of 2% or 3% of GDP, while it is estimated that in 2025 there will be growth of around 5%, which will reach a good part of the different productive sectors. who today are further behind.
Challenges of an elec yeartoral
From the point of view of the public sector, next year will be demanding in terms of obligations, which exceed US$20 billion, including provincial commitments.
The Government, however, hopes to cancel or refinance these debts, of which around half are national public securities.
The gradual reduction of country risk and the possibility of a new agreement with the International Monetary Fund (IMF) increase the chances of successful management. Likewise, in 2025 the legislative elections will be held, and their progress will be conditioned by the chances of a victory for the ruling party, which would generate a good perspective for the markets.
Assuming a reasonable victory, the Government’s economic program should be consolidated: fiscal balance, lower inflation and deregulation.
The evolution of this program during the first half of 2025 is key, particularly in terms of increased consumption and investment (RIGI and privatizations). The lifting of the exchange rate could also have a favorable impact in the same period.
It is important not to lose sight of what, under this scenario described, will be the variables to be monitored by companies.
In addition to controlling their costs in this stage of greater price stability, companies must be attentive to the businesses that are opened to them by the progressive deregulation of the economy and access to bank loans and the capital market.
Likewise, in 2025 the legislative elections will be held and the progress of the economy will be conditioned by the chances of a victory for the ruling party (even more so if the PASO continue to operate).
By Silvia Andrea Tedin (Tax & Legal Partner) and Ricardo Proganó (Director Corporate Finance) of SMS Buenos Aires
Source: Ambito
