The first year of the Government’s economic management found the Argentine economy, once again, facing a dilemma, but very different from other previous crossroads. For the first time in almost two decades, the Central administration does not require financing from the Treasury: The primary surplus is estimated to be around 4.7% and the total, approximately 1%.. This is the first great novelty in the record of Argentine economic policy, which contributed to Argentina’s fame as a serial defaulter.
The figures say. The economist Nadin Argañarazpresident of IARAFhighlights that the magnitude of the national fiscal adjustment carried out in the first 11 months of 2024: annualized, is equivalent to 4.7% of GDP, that is, 0.3% more than what is necessary to eliminate the fiscal deficit. “In effect, if the Government wants to close the year with a fiscal surplus of 0.3% of GDP, the fiscal adjustment for this month of December must be 1% of GDP. This means that in the last month of the year, one fifth of the necessary annual adjustment must be made,” anticipates Argañaraz.
A year of severe adjustment (going from highest to lowest, as all analyzes indicate) leads directly to a contraction in private and public consumption, a slowdown in investments and a progressive dismantling of speculative positions, fueled by expectations of end of 2023 of a certain risk of hyperinflation that, above all, overvalued the exchange rate. We only have to verify the flow of international tourism between both summers to give us an idea of the magnitude of the sudden change in relative prices. With a gap that reached almost 150%, prices in hard currency were as absurd a year ago as they were unrepresentative today. The flow of commerce in neighboring towns was reversed in less than a year. For example, in a well-known pharmacy chain, a neighboring city had its store in 64th place in the national sales ranking and it became 2nd due to the effect of “ant smuggling.”
This trend breaks into a scenario that is also new for our “abnormality.” Camilo Tiscorniadirector of the consulting firm C&T Economic Advisors, points out that as the State withdraws as a borrower, there is still loanable capacity. “Savings appear available to finance the private sector and I believe this is valid for both pesos and dollars. That channel already exists and what is being proposed now is to facilitate the expansion of the universe of those who take credit in dollars, obviously it is a way to also facilitate this expansion.”he explains. Banks have abundant liquidity, in relation to the deposits they have received, so it could be evaluated whether there is room for them to continue lending. But there must also be a limitation that could be overcome if the restriction that they can only lend to banks were relaxed. the exporters. “It seems to me that it is a macro-prudential measure that seems very important to me and if it were to be expanded, it would be necessary to study very well how to identify the type that is going to take that loan, really has income covered by the currency in which credit is given,” he adds.
Uncertainty about the future had even distanced savers from banks as entities to protect their funds, producing a slow but continuous drain of private deposits in dollars during the last three years. The whitewashing and relative tranquility of the exchange market for a semester turned the equation around. It is estimated that US$22 billion were capitalized and that although there was no obligation on the part of the more than 300,000 CERA accounts (especially opened for this purpose). Although there was no obligation to leave the funds, the vast majority did and so, the day after challenge for the banks is how to seduce the saver so that they channel those funds and not return to the mattress.
Thus, the private deposits in dollars that reached US$34.38 billion were parked with rear drainage in US$31,830 million. A number that a short time ago was a utopia but that today poses a major challenge to the banking system: to return to work on its own and not on financing agents of a greedy Treasury.
Tailored wallet. The arsenal of tools designed by entities fundamentally involves the capital market: issuance of Negotiable Obligations in dollars from previously qualified companies and investment funds oriented to the various risk sensitivities and liquidity needs that savers seek.
“The recent inflation data of 2.4% monthly in November was a positive surprise, being 0.4 points below what was expected. This favorable context prompts us to extend the terms and seek higher returns in the long term, maintaining a neutral position between CER and fixed rate instruments,” comments Francisco Speroni, senior analyst at Cohen Aliados Financieros.
For 2025 it anticipates further cuts in the monetary policy rate, along with a moderation in the pace of the crawling peg. “In a context of inflationary slowdown, we expect the economic team to maintain its current approach of seeking (almost) neutral rates in real terms but positive in relation to the official exchange rate,” he closes.
A study carried out by a renowned private bank showed that during 2024 credit grew almost 225% (205% year-on-year in pesos) and 115% in dollars. This data seems to suggest that in a year that has not yet been able to reach the levels of consumption prior to the inflationary run, the increase in credit may have two linked sources of origin: on the one hand, the increase in the supply of dollars due to the trade surplus of the first semester and the money laundering, but also due to the reappearance of consumer credit due to the slowdown in inflation and the decrease in correlative rates as inflation expectations were deactivated.
Consumption in sight. He GDP grew in the third quarter of the year 3.9% compared to the previous quarter, but still, compared to the same period in 2023, it is 2.1% below. On the demand side, the segments that rebounded the most are those that had been suffering the most from the recession: gross fixed capital formation (+12%), private consumption (+4.6%) and public consumption (+0.7% ). But also, all these items are in negative terms in comparison with the third quarter of the previous year: -16.8% (fixed capital), -4% (public consumption) and -3.4% (private consumption). With respect to this last indicator, the appreciable increase in this quarter does not yet compensate for the fall in the first two of the year (-5.7%). “For a recovery, an increase in real wages and disposable income is needed. “The improvements in real incomes in recent months have helped, but we cannot yet speak of a full recovery,” predicts the latest report Ecolatina. Specifically, It foresees an improvement in purchasing power of 10% year-on-year for next year, which will be the basis on which consumption could recover a good part of what was lost this year.
The challenge for the most precise projections for 2025 has to do with the fact that economic activity has been showing a very heterogeneous, irregular and “saw-shaped” performance. “Some indicators show that the recovery of the last quarter of the year will be maintained, although it will be less dizzying than that of the third quarter”he concludes.
Perhaps the best example of how a vicious circle can be transformed into a virtuous one thanks to a different framework is real estate. This year, construction was one of the sectors most affected by the original devaluation, instability and the drop in income of potential borrowers. With inflation projected in the order of 30% annually by 2025, mortgage credit adjusted by the UVA index reappeared and with rates that have now settled at 6% annually. The economist Fernando Marull that andThe sales price index in blue dollars in terms of formal salary per square meter will go from 4.6 times in 2023 to 2.4 in December. An explanation of why the demand for mortgage loans increased by 46.8% in the third quarter of the year. A number that is not surprising if one considers that Argentina still has the lowest stock of mortgages in the region in relation to GDP (it does not reach 1%). With the bar so low, everything is a win if credit also does its homework.
by Tristán Rodríguez Loredo
