Yet another gap appeared in the Argentine economic scenario. In addition to the exchange rate, which separates the multiple types of dollars that they claim to have or the difference between those who earn the most and those who earn the least, the course of economic policy generated another: the comparison between the inflation forecast that the minister Sergio Massa had done as a result of the measures taken and what actually happened.
Expectations. The Economist Fernando Marull updates monthly, with each measurement of the official CPI, that crack between expectations and harsh reality. April should have already been below 4% monthly (3.9% as a ceiling) but it doubled and May, everything indicates that this gap would widen. A first reading is that inflation is accelerating: what until recently was a ceiling (6% or 7% per month) today is a floor. The question that haunts the official projections is whether the pace of said acceleration coincides with the electoral timing.
Recently, the President once again referred to “self-constructed” inflation based on expectations that the small merchant (the new villain in this saga) is remarking just in case, mobilized by the jumps in the blue price and the chain of suppliers that They are adding their own momentum. It is an explanation that does not obey the “multi-causal” nature that the Government cultivated so much, but the data seems to indicate some certainties. In the first place, that the dollar is the indicator that everyone looks at to anticipate the rise in other prices. Not surprisingly, after the announcement by INDEC that each month it is subjected to pressure to make up bad news, “financial” dollars skyrocketed and the Government managed to tame the two most used (the MEP or stock dollar that individuals use and the cash for liquidation, of wholesale access) after they scratched $500.
However, his firepower is marked by existence in his own arsenal of fresh dollars. The accounting alchemies of showing the total level of reserves are useless if, at the end of the day, you do not have foreign currency to meet the demand of importers, committed payments to international organizations and a growing item: bank requests for deposit withdrawals. Technically, financial institutions have a reserve of said funds immobilized in the Central Bank, which counts them, however, as part of the “international reserves”.
Sebastian Menescaldi is associate director of the consultancy eco go. In January, she published the cover story of NOTICIAS with her partner Marina dal Poggetto. It was a forecast for this year in which they labeled the economic team’s habit of resorting to creative formulas to find solutions as whether or not there are rabbits in the magician’s “galley”. “Today we see the scenario as the least favorable: there are no rabbits. The Central Bank does not have the dollars it needs to avoid the dilemma of opting for a lack of exchange and inflationary control or a sharp drop in activity due to further restricting imports“, Explain.
weekly dynamics. The projection made by EcoGo It is an inflation of 180% (9% cumulative monthly), according to their measurements: already in the first two weeks of May they point to a figure close to 8.4% for the entire month. “Since the beginning of the year, the strong impact of the drought has been clearly seen in the rises in meat, fruit, vegetables and farinaceous products,” he argues.
Unlike what happened until last year, in 2023 the food item has been leading the ranking. María Castiglioni, director of C&A Asesores Económicos, observes that a very complicated dynamic is developing in the medium term (from now to the end of the year) that is added to pre-electoral uncertainty but also due to the transition period between the two governments. “Also, when you look at the underlying, the macro, there isn’t much room for optimism. The private estimates of the last two months were overwhelmed by the INDEC CPI measurement. Above all, in some areas with a more fragmented offer, with more ‘black’ and that are more difficult to control”, he points out.
The other aspect that, in the economist’s opinion, is paving the way for inflation is monetary expansion, especially financial liabilities (securities to absorb the issue resulting from fiscal and quasi-fiscal deficits) and which have been growing at more than 100% per year. “The Government, far from making a contractive policy, does not limit spending and permanently needs internal financing. This is enhanced by the fall in the demand for money, which thus multiplies the inflationary effect.”, he emphasizes. In addition, he adds that if the Government fails to reach an agreement with Brazil and China to be able to import from those sources without using reserves or convince the IMF to advance funds (which is also equivalent to borrowing) without taking measures to lower the deficit, this crisis will worsen. .
Impacteither. The rise in some items more strongly than others, such as food, additionally penalizes the strata of the population that spend more on basic consumption more than proportionally to those with higher incomes. However, this acceleration did not translate into a similar increase in the poverty rate. Augustine Sagedirector of Observatory of the Argentine Social Debt, of the UCA, states that said indicator has been increasing, but “it is not so serious compared to the inflationary catastrophe.” Because? He finds this explanation in that there is more work, formal or informal, due to the peculiar dynamics of a consumer economy with many circulation pesos. “Poverty grew less strongly than in 2022, but it continues to be sustained because we observe that there are more odd jobs and other low-skill job opportunities, and with that more help from social programs serves to cushion the crisis,” he notes. In conclusion, Salvia points out that in this way households continue to compensate with more work for the drop in their real income and thus could end this semester at around 42% and avoid an abrupt jump like that of 1989 and 2002.
Another sector sensitive to the “spiralization” of inflation is that of retirees, because although periodic readjustments are made, they take past inflation and not future inflation as a parameter. George Hilleconomist of IDESA carried out a simulation assuming an 8% rise in the CPI in May, June and July, a conservative estimate. This gives them that, compared to December 2019, the liabilities governed by the pension mobility law will have lost 30% of purchasing power and 40%. If it is higher, the difference with December 2019 would be 40%. “The mobility formula lags behind inflation and when it goes down, retirements are recovered. But when a new Minister of the Economy arrives, in order to close the public accounts, he usually tries to validate that reduction, ”he adds. For this reason, Colina predicts another wave of lawsuits for updating pension assets, since a 30% lower floor would justify it. “Thus, tax savings are kicked forward and thus more public debt is generated again “he concludes.
A host of factors to account for, in the future, the costs of not having taken the “war against inflation” seriously.
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