The Argentine economy lost momentum in 2022 and faces icy forecasts

The economic activity of Argentina it managed to grow 5.2% last year, well below the strong recovery registered in 2021, and faces forecasts of further cooling for this year, given the persistent imbalances that afflict the South American country.

Economic activity slowed down significantly last year compared to the growth levels of 10.4% that had been achieved in 2021, but with a deterioration that, moreover, has accentuated in the final stretch of 2022.

As reported this Thursday by the National Institute of Statistics and Censuses (Indec), the monthly estimator of economic activity, which serves as a provisional advance to measure the quarterly variation of the gross domestic product (GDP), contracted 1% in December compared to November and thus chained four months down.

In addition, the indicator registered a year-on-year contraction of 1.2% in the last month of 2022, ending a 21-month positive run and deepening the slowdown that dominated the last four-month period of last year.

LOSING VIGOR

For the private consultant Orlando Ferreres & Asociados, “December records reinforce the notion of activity between stagnation and decline.”

The Argentine economy has lost strength, mainly since the middle of last year, as a result of a complex international context and its own unresolved imbalances -fiscal deficit, limited monetary reserves, exchange distortions, very high inflation- deepened by internal political tensions.

For Maximiliano Gutiérrez, a researcher at the Mediterranean Foundation, “the main explanatory factors of the slowdown in the level of activity have to do with the inflationary acceleration” that affects “the purchasing power of aggregate demand” and, convergingly, “the growing difficulties for the supply of parts and pieces of imported origin that lead to restrictions on the supply side”.

But the important sectors of agriculture and livestock (-18%), industry (-2.1%) and commerce (-1.1%) had a very negative performance.

RECESSION ON THE HORIZON?

According to the 2023 Budget, Argentina would grow just 2% this year, but the private economists that the Argentine Central Bank consults monthly for its expectations report forecast that the Argentine economy would advance only 0.5% in 2023.

For the consulting firm Ecolatina, in the absence of exogenous or endogenous shocks, Argentina could avoid a recession this year, “but not the trend towards growth moderation”.

“Starting with a lower drag than in 2022, economic activity will be affected by a new drop in agricultural production, restrictions on imports that will not be significantly relaxed in 2023, and a contractive bias in the fiscal-monetary sphere, resulting in an expansion of GDP of a few tenths above population growth”the consultant said in a report.

But according to the consultant Orlando Ferreres & Asociados, “the projections for the year that began anticipate a negative result of the product, with unresolved macroeconomic tensions, with strong limitations due to the lack of foreign currency and with meager private consumption derived from years of contraction of family income”.

Source: EFE