Even though it is predictable, it does not stop attracting attention. After the inflationary tsunami of the last semester, exacerbated by the jump forward driven by the December devaluation, the drop in all the variables associated with consumption and purchasing power does not cease to surprise. The first to double the bet is the President himself who, given the scandalous 25.5% rise in the Consumer Price Index (CPI) in December, maintained that he should have added five more points given the great distortion of prices and existing controls. .
The data. With the INDEC data for December and the January projection, The REM survey of the Central Bank that listens to the main market consulting firms, showed a small correction of the estimated inflation for February to 18%; for the entire year, 244% and also a drop in economic activity (-3%). This implies a slowdown in the inflation rate, but from very high levels and motivates the great bet of the economic team: to converge by the middle of the year with a monthly rate of one digit in decline, a unification of the exchange market and the continuity of the twin surplus, essential so that the scheme does not collapse.
The latest data from INDEC shows that in December economic activity had fallen 4.5% year-on-year but the manufacturing industry plummeted by no less than 12% during 2023. Everything indicates that only during the second quarter could activity begin to find a floor from which to grow later.
The truth is that the acceleration of prices had a lethal effect on the income of a good part of the population and was evident in a drop in consumption compared to the mediocre previous year, the erosion of formal and informal salaries and also of retirements, which will only increase 27% in March. The figure, much lower this time than what the quarter will have accumulated, shows the shortcomings of an “updating” formula that, as the economist and demographer maintains, Rafael Rofmanwas not designed for a period of high inflation, since it not only reflects the rise in the CPI, but also the pension collection and the wage variation index with a time delay. This combination requires continuing to maintain the “bonus” that raises the retirement floor to almost $205,000 for March.
The second group of affected people are workers with little possibility of collectively defending their income, either because they are precarious or because the industry in which they are employed is suffering the vicissitudes of the crisis. Unemployment (at around 7% of the total for now) is a necessary indicator, but not sufficient for the dimension of this social debacle since formal private employment is a minority. In the last 12 years (since the economy showed signs of stagnation) the only thing that has grown is monotributist employment, state employment (especially in the provinces) and informal employment. Precisely these sections are the most exposed to the inclement macroeconomic conditions of forced fiscal and monetary adjustment.
For more than two decades, the thermometer of the crisis has been taken by the Argentine Social Debt Observatory (ODSA)from the UCA. This week it released the poverty index corresponding to January, which although it is always higher than the official one constructed by the INDEC (EPH) because it takes other additional indicators than the level of income with a figure that is frightening: 57.4% and level 15% indigence. For its director, the sociologist Augustine Salviathese figures are not the product of a temporary crisis but of the exhaustion of a regime whose exit, in addition to record levels of poverty close to the 60% of the populationa segmented and precarious labor market. To the “always” poor who do not have quality social coverage, are added the “new” ones descended from the increasingly fewer middle class.
Salvia clarifies that the estimates of indigence and poverty rates for December 2023 and January 2024 constitute statistical projections made by the ODSA through simulation exercises on EDSA microdata for the third quarter of 2023. Furthermore, these projections They were not carried out by “linear extrapolation”, but through nowcasting techniques, which are used to provide real-time estimates or short-term predictions using current and immediately available data. “In this the president has not been well informed,” he added, in reference to the “drawing” disqualification that the President had referred to the Observatory’s results.
Another economist Martin Gonzalez Rozada (UTDT), which estimates poverty level projections based on income, maintains that the abrupt rise in the ODSA measurement may be due to a methodological issue that causes the traditional gap of 4-6 points with the EPH to have increased. . “It is possible but not probable,” he emphasizes. More or less points, the reality is that the adjustment was serious.
Balancing. The search for zero deficit was stated from the beginning, but it was blended with other grandiose promises, such as dollarization, for now on hold. January was the first month in more than 16 years that presented a “twin” surplus (fiscal + external). The numbers that the minister proudly Caputo showed the second of the International Monetary Fund Gita Gopinath on their visit to Buenos Aires they are not a whim. The objective is to accelerate the convergence of fiscal and monetary balances (with reflection in that of the external sector) to gradually dismantle the stocks and give signs of rebound. But the question is the sustainability of the “blender plan” as he labeled it. Carlos Melconian two months ago.
The Economist Esteban Domecq points out that the current dynamics are a direct consequence of the release of prices repressed for months under the different control formats, the increasingly sharp clamps and a monetary policy that validated the permanent financial red. It projects a recession of 3.5% for this year, but the sectoral analysis shows that the impact is not homogeneous, with losers by a landslide and those who scratch the tie.
Spotlights. In the gaze of Marina Dal Poggettodirector of Eco Go, raises six points to monitor, three economic ones associated with stabilization and many others social ones linked to governability and the ability to sustain systemic productivity and lasting fiscal balance. In the economic ones, he points out: 1) How does the inflation reduction path continue?; 2) if the purchase of dollars from the Central Bank as payment in installments for new imports begins to normalize and what is its impact on net reserves and the gap and 3) what do the fiscal numbers and their impact on the monetary program. Regarding politicians, he suggests following closely: 4) how it evolves the distributive conflict (joint unions and the succession of strikes) against the liquefaction of income; 5) what is society’s reaction to the recession and 6) how does it continue? the treatment of the DNU and the Omnibus law, after its reset.
In his opinion, the economic program is giving better results than expected, especially on the fiscal side: the good result in January, the BCRA’s ability to accumulate foreign currency and the slow deceleration of inflation, but doubts remain. the “sustainability” of the social side.
“The million-dollar question is how quickly inflation decelerates, how deep the recession is, and to what extent daily micro devaluations and the interest rate can converge to a single-digit inflation rate, without having to resort to a new exchange rate jump.” , he concludes. An uncertain outlook with the only certainty that the time factor will play the starring role this time in a race that will not be one of prices against others but of income erosion vs. patience.
