The latest economic data suggest that the decline in the economy has been decreasing significantly, leading the Government to point out March as a turning point. However, the economic team is cautious, preferring that events confirm the end of the recession and the beginning of the “V” recovery, Just as they hope, however, in the city that vision seems too optimistic.
The Index of Economic Activity (EMAE) published by INDEC This month, corresponding to January, shows a drop of 1.2% compared to December. Although official data is not yet available, the General Activity Index (IGA) of Orlando Ferreres suggests a slight improvement in February, with a minimum increase of 0.1% compared to January.
The improvement, although modest, signals a point of stabilization, although sales have not yet rebounded. However, several sectors indicate that a similar situation continued in March, with stable consumption but without significant improvements.
The recovery is expected to be gradual and will likely manifest first in rural areas before reaching urban centers. In this context, the economist Fernando marull suggests that the recovery could follow a “V” shape, but even in that scenario, It would only be enough to recover what was lost since the sharp decline in the last quarter of 2023.
“What one sees is that inflation will continue its downward trend and salaries in many sectors are increasing at 15% monthly. Even retirement benefits are going to recover faster than prices. And that will lead to an acceleration in the pace of improvement in the second half of the year.“explained the analyst.
The most listened to consultancies
The experts of Econviews They agree that inflation will continue its downward trend. In March, they registered 12%, with a marked slowdown in the food sector, and by April it could be 10%. If this materializes, it is likely that it will reach single-digit values again in May.
Andres Borensteindirector of the consulting firm, pointed out that “the relevant question perhaps is not whether inflation will soon be below 10%, but when it could stabilize at levels of 1% or 2% monthly. And to achieve this it will be necessary to implement a plan of serious stabilization”.
The consultant LCG detailed in a report the current situation of the exchange market, inflation and rates, in addition to highlighting some of the modifications that the Casa Rosada seeks to promote to achieve economic recovery. “The slowdown in inflation exceeds our initial expectations. This is due in part to two factors:
- The previous overreaction with adjustments intended to preserve or restore margins in anticipation of months in which a lagging price adjustment was expected.
- A demand that is not supporting significant increases, both due to the drastic drop in purchasing power and the loss of jobs,” LCG explained.
“Exchange stability could be maintained for a couple more months if we choose to maintain the stocks, but tensions could arise once access to the Single and Free Exchange Market (MULC) is regularized for importers. especially after most of the crop has been cleared“, they pointed out how one of the possible causes of pressure on the dollar.
The city analysts
For his part, the analyst Christian Butler noted in his X account that, “More than half of the activity is explained by private consumption, there cannot be a V-shaped recovery without an increase in consumptionthere can be no increase in consumption without recovery of income.
The Capital Foundation expresses itself along the same lines in its latest report in which it concludes that economic activity is expected to will contract by approximately 4.3 points in 2024without taking into account the positive impact of the agricultural sector (+1.2 net points, considering its sectoral impact and a reduction of 3.1% including agriculture).
Javier Milei IEFA Latam.jpg
Photo: Juan Vargas – NA.
The document highlights that “with real incomes similar to those of 2003/2004 and a review of public service rates that limits the purchasing power of families, sectors related to consumption will hardly experience a rapid recovery.
In addition, uncertainty around investment will also limit the dynamics of sectors such as construction or the production of capital goods. In our base case, the economic recovery is delayed, with a slight improvement towards the third quarter, but it is not expected to recover to the previous level until 2025. Therefore, the exit from the recession will hardly follow a V shape.”.
And the stocks?
Claudio Zuchovicki, renowned financial expert and very close to the head of state, addressed the situation in an interview for TN. The economist highlighted the importance of timing in finance, warning about the dangerous fascination with a single economic tool. He thus recognized that Argentina maintains certain macroeconomic balances adjusting, for example, pensionsbut he questioned whether these solutions are unsustainable in the long term.
Zuchovicki highlighted the importance of timing in finances, warning about the dangerous fascination with a single economic tool. He thus recognized that Argentina maintains certain macroeconomic balances adjusting, for example, pensions, but he questioned whether these solutions are unsustainable in the long term. This puts the vision of a V-shaped recovery in check.
Regarding the lifting of the stocks, Zuchovicki stressed the need to carefully evaluate the right moment to avoid “paralyzing the economy or generating confusion in the population.”. He compared money management to hosting a party, highlighting the importance of providing some initial freedom but withdrawing it in time to avoid excesses.
Thus, the Government’s previous cohesion regarding the economic direction begins to show nuances, and a single certainty looms over the outlook: the possibility that inflation will decline to a high single digit. However, the constant adjustment leads to a recession that moves away from the much touted “V”-shaped recovery, heading instead towards an “L”, which implies a sharp decline followed by stagnation.
Source: Ambito
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