How much can the dollar be worth in 2024?

Although in the analysis of the last 3 years we can say that the balance was positive, since 2011 the Argentine economy has been in a state of stagflation, that is, stagnation with high inflation. The projections for the year 2023 show that Argentina would continue in the same state. If we analyze the statistical drag left by the GDP in the year 2022, it is negative at 1.8%. This means that, during this year, if the evolution of the main economic variables remains stable, activity would contract by 1.8%. The statistical drag shown by the EMAE (Monthly Estimator of Economic Activity) is also negative and amounts to 2.0%. For their part, the estimates of the main economic analysts are somewhat more pessimistic. They foresee that the GDP could fall by up to 5.0% throughout the year 2023.

As if all this were not enough, the year 2023 is an electoral year, a situation that makes the panorama much more complex. 90 days after the closing of the lists to present the candidates, Mauricio Macri announced, through a video on his social networks, that he will not be a candidate for president. We do not believe that the date on which the announcement was made was accidental. The former president decided to move a piece first, opening the game to the rest of the political parties. Now the ball is on the side of the ruling party. Everyone wonders who will imitate Macri, who will be the figure who is willing to step aside.

During this year it is inevitable to talk about politics in every economic analysis that is done, since every movement that occurs in the political sphere will have immediate repercussions in the economic sphere. Once the ex-president’s announcement was known, there was speculation about how the markets would open the next day. From our point of view, Mauricio Macri’s decision was correct but, with Monday’s newspaper, we can say that he did not have great repercussions on the market. To draw further conclusions, we must wait for the other political parties to move their chips as well.

How much will inflation be in 2023 and 2024?

Regarding the price variation, February 2023 was the first month that annual inflation crossed the three-digit barrier. It was thought that we would reach annual inflation above 100% before the end of 2022. Although that did not happen, it did not take long to arrive either. Generally, for seasonal reasons, the highest monthly inflation of the year is usually experienced in March. In this case, the main projections oscillate between a 7.5% and 8.5%. If we go back to what happened between February and March of last year, monthly inflation for February was 4.7% and for March 6.7%.

Under the assumption that history repeats itself, if in February we experience monthly inflation of 6.6%, in March, we should expect monthly inflation 2 percentage points higher, that is, 8.6%, even above estimates more pessimists. Assuming the worst case scenario, annual inflation would rise to 106.1%. In any case, point more or point less, the situation is very delicate. We are going to have to face 3-digit annual inflation throughout the year 2023. We also do not rule out that the first months of 2024, that is, of a next government, will be very uphill. It will be very difficult for the next administration not to experience high inflation, at least during the first months of his term.

How much can the dollar go up in 2024?

Regarding the next government, assuming the opposition wins, for the official dollar and inflation we propose 3 different scenarios. The 3 scenarios repeat the situation until November of this year of a monthly devaluation rate similar to monthly inflation, around 6.0% – 7.0%. The divergences appear from the last month of the year, that is, with the assumption of a new president.

The first situation assumes that, during the first quarter of 2024, monthly devaluation and inflation continue around the aforementioned values. In that way, As of March of next year, we would have a wholesale dollar of around $420 and cumulative inflation for 12 months slightly above 100%.

The second scenario states that, in December 2023, the new government decides to carry out a monthly devaluation of around 30%, followed by another of 10% in January, to then stabilize again at 6% per month. In this case, as of March next year, the official dollar would amount to approximately $535. Inevitably, devaluations of these magnitudes will have immediate consequences on the CPI. It is probable that, faced with a monthly devaluation of 30.0%, we will experience monthly inflation of around 18.0%, the following month it will be close to 15.0%, in the third month it will drop to 10.0% and then , stabilize around 8.0%. Thus, as of March 2024, we would be experiencing annual inflation of more than 150.0%.

Finally, a more extreme scenario, in which the devaluation decided to carry out by whoever assumes the presidency is 50% for a single month, implementing devaluations of around 20% and 10% in subsequent months. In this case, we should expect a wholesale dollar around $700 by March 2024. The impact on inflation will be directly proportional to the previous scenario. Faced with a monthly devaluation of 50.0%, we cannot expect monthly inflation of less than 20%, at least for the next 2 months. In this case, annual inflation at the end of the first quarter of 2024 would be higher than 230%.

Regardless of the path to be followed by the next presidential administration and what the exact numbers end up being, what seems inevitable is carrying out a devaluation, which will have immediate consequences for inflation.

Faced with this conclusion, what worries, and a lot, is that the political parties do not seem to be showing economic plans that address both macroeconomics and microeconomics. It gives the impression that everyone is looking at the macro part, without paying special attention to the direct negative consequences that it may have on the microeconomy.

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