The truncated caravan of the World Champions and the subsequent entertainment in their small payment to the consecrated, probably marked the end of the World Cup oasis and the return to reality. Practically the month that passed with attention focused on the stadiums in Qatar left the previous concern in the economic scenario in the freezer: inflation.
In the middle, the November measurement of the INDEC returned an encouraging 4.9%, marking a gradual slowdown since July. In this, several elements played in favor: the implementation of the program “Fair Prices” which in the first implementation accommodated the prices of the 1,500 products involved, the seasonality of some items (which ends precisely at the end of December), the delay in the tariff adjustment and the drought, which accelerated the liquidation of cattle, putting a ceiling on the value of the meat
Cheer up. But all that came to an end. In the first place, the generation of the “private bonus” that was added to that of retirements, the perception of the Christmas bonus and other incentives for consumption that mobilized the spirit already paid for the World Cup. “There is no doubt that the ‘world champion effect’ raises the mood, the famous mood of the consumer is temporarily happy and relieved, which, added to the proximity of the Holidays and the end of the year, means that there could potentially be a very contextual peak of consumption of celebratory or indulgent categories (from sweets, cold cuts or alcohol)”, explains the consultant Ximena Diaz Alarcon, Director of Youniversal. In addition, he points out that, beyond the festivities, there are changes that are structural (uncertainty, lack of predictability, low or no growth expectations, galloping inflation, etc.), but others are newer and “could shed a light of hope on the mood of the local consumer”, he estimates.
Prices. To coincide with the expectations of the economic team to gradually reduce inflation from the “ceiling” of 7.4% in July to 4% per month for the summer and then reaching 3% in the second quarter, the alert light came on. An old dilemma of economic policy only cushioned by the seasonality of the demand for money that presents a peak in December and January that gives some oxygen to the monetary issue without so much inflationary counterpart.
For the consultant Invecq, inflationary relief, it could be offset with the necessary ‘catch-up’ that regulated prices have to carry out, which are still almost 10 points behind core inflation in the last 12 months, despite the acceleration registered in November . “The great challenge of this Fair Prices program is that the cost structure accompanies, since otherwise it will not be sustainable. Faced with this, the Government decided to apply more price controls to other links in the production chain and advanced this week with a new price program with input suppliers”, he stated in his report.
Jorge Vasconceloschief economist at IERAL, warns that the underlying inflationary pressures have not abated, “although on the “surface” (evolution of the Monetary Base) greater control is observed”. Notes that the balance of 2022 for the soybean dollar and the purchases in the secondary market of Treasury debt have activated monetary issue factors that accumulate the equivalent of 2.9% of GDP, to which another 4% is added for the payment of Leliq’s interests.
Even controlling the “operative” fiscal deficit, the snowball generated by the financing of the previous red is generating a nightmare for monetary policy. It is estimated that by the end of this year there will be 2.5 times the monetary base seeking to be financed each month. In addition, with the rise in interest due to the increase in inflation and not encouraging a greater dollarization of the portfolios, the financial burden grew.
For Camilo Tiscorniadirector of the consultancy C&T Economic Advisors, the hiatus in the price slowdown is not automatically sustainable. In order for the official aspiration to be fulfilled, “there should be a consolidation of the fiscal situation (with a strong conviction to reduce the deficit) but also that there should be good results in the bids for titles.” In his opinion, this is increasingly necessary because although the operating red is going to shrink as of December, debt maturities remain concentrated. “This affects high inflation expectations. It is not a question of renewing or exchanging debt but on what date because today you cannot place beyond May. If it does not happen, a mountain of maturities will be generated by 2023 ”, he adds. Regarding medium-term expectations, Tiscornia sees no reason why inflation in November of next year ends up being much less than 95% of what was projected for 2022. “But if there is a change of government that would correct the official exchange rate and tariffs, it could push inflation next December and end the year higher than this year.or”, he concludes.
The dollar, always. Finally, what could also condition the “pax inflationaria” is the other vulnerable side of the economy during the year that is ending: the external sector. Some economists, like Fernando Marullconsiders that in this “bottleneck” lies the explanation of the brake on the reactivation of the economy: The challenge will be how to grow at a sustained rate if there is difficulty in supplying inputs or the financial trap for paying obligations abroad.
The consultant ecolatin, warns in his latest weekly report on the consequences of the drought -among other factors facing 2023. “The La Niña phenomenon is expected to extend until the first quarter of next year and begin to give way to a neutral phase with a 71% probability during the February-April quarter,” he said. And he added a very compelling fact: in a year marked by negative net financing from the IMF, in contrast to this year, “less dynamism in world growth and an appreciated exchange rate, the stress on external accounts in the first tranche of 2023 will place the completion of the Néstor Kirchner Gas Pipeline as a fundamental variable in view of the need to obtain a surplus balance”.
Conclusion: far from the debacle, but much closer to the same problems with which a month ago, the Argentine economy entered the World Cup frequency. The same challenges, but in a context with its own dynamic “of the unthinkable” as the remembered Dante Panzeri used to insist.
