In many respects, relief for the past year also reached the economy, but the hope that all that will come will serve to bury frustrations and confirm the surprises of the past year. If the keyword for 2021 was to be found, it was inflation. And if it would be necessary to find the one that is projected to be that of 2022, the bets point to the agreement with the International Monetary Fund (IMF).
Last May, NEWS made his traditional note on economic scenarios and not because it was the beginning of a management. The reason was the uncertainty that reigned in the local economy for what was expected could be a resurgence of the pandemic, on the one hand, and the twists and turns in the delayed agreement with the IMF, on the other. At that time, the Government had decided to try the “dance and hammer” tactic, by which quick and more or less complete closures were proposed when the number of infections reached the figures considered alarming.. The projection was no less: forced inactivity had been the key to the fall in GDP during 2021 and the consequent deterioration in collections, the growing red in the deficit, the closure of shops and companies and the increases in poverty rates and unemployment.
In parallel, the exchange rate crisis only had two respite: when the terms of trade improved when the upward trend in commodity prices was confirmed and when the Fund brought funds in special drawing rights (SDRs) for US $ 4.3 billion. A brief hiatus in the gradual disappearance of international reserves, as the measures to further restrict the outflow of dollars or block imports were being exhausted.
Duality. Just at that moment, heThe two projected scenarios basically varied in the probability of a greater or lesser closure of the economy due to decisions of the Government’s health policy: the first was that of a “slow improvement”, which anticipated slight closures, a control in the drain of dollars and in the rise in prices, a recovery in economic activity, an improvement in real wages. We assign a 40% probability.
The other was a “plateau” one, characterized by exchange rate instability (with a blue dollar projected at $ 200 by the end of December), iInflation above 55% per year, fall in real wages and GDP recovery below the collapse of the previous year.
The data. The final numbers of the year yielded sung results, but also others that would have missed the most optimistic seven months ago. In the first place, economic activity ended up recovering, with an estimated increase in GDP of 10%, leaving only one point below the terrible year of 2020 and another one if population growth is considered. The Economist Camilo Tiscornia, director of C&T Economic Advisors, the improvement in activity in relation to what was projected. Several things were combined: a) the Government opened the restrictions earlier and faster; especially, the third quarter, which was much better than expected in this area; b) a scenario emerged with export prices better than expected, which gave oxygen to the Government in exchange matters; and c) SDRs were taken as genuine income to expand electoral spending ”, he explains.
On the other hand, in terms of inflation, the opposite happened and the efforts so that the monetary tsunami of 2020 did not reach the gondolas forced innumerable neologisms: agreements (when they were unilateral), suggested prices (when they were imposed), listings with an infinity of products of dubious application and, finally, export quotas, as happened with beef. At this point, no one should expect any other result than failure, although the delay in transmission throughout the entire production chain produced more distortions than benefits for the consumer, who in an odd year is perceived as a voter. At this point, for Tiscornia, the fact that it was much higher than expected shows the effect of the monetary issue. “It is difficult to quantify how and how much it is transferred to prices, because part of it came from 2020 and that explained most of the inflation, but also that which occurred in the second half of the year, when the electoral calendar weighed down “he adds. And he also considers that an environment conducive to inflation expectations was created, the exchange gap that widened a lot and that ended up leaking into the CPI in some way. Finally, we could add an argument that the Government dusted off when it resigned itself to the fact that 29% of the 2021 budget was a utopian reference: international inflation that, in another magnitude, also pushed the general global price level.
A new scene. The question that arises when reviewing the deviations from what was projected last year is what could be ventured for 2022. In this, one certainty and two unknowns weigh. There is a statistical drag, which by itself will move the final data for this year and will give a floor of 3% for the level of activity, for example.
The two main uncertainties go to the side of how the variables that were distorted during the almost two years of the pandemic and the final result of the aforementioned agreement with the main international creditor, the IMF, will be rearranged. What is projected, according to the C&T partner, are months of fiscal adjustment, rate updates, an increase in the interest rate and an improvement in the “official” exchange rate. “I believe that, although an agreement with the Fund prevents the runaway, in itself it does not solve the problems that the economy has already been dragging down”, He concludes.
One piece of information is striking is that in October the level of activity, which had been growing strongly, fell 0.8% and is attributed to the fact that in that month the shortage of dollars forced the Central Bank to apply the tourniquet to imports, affecting the flow productive. And he believes that it is a mistake to think that we can now embark on a process of growth without limits is a mistake considering the restrictions that still weigh.
Uncertainties. Jorge Vasconcelos, IERAL chief economist, is more blunt on this point. In the entity’s latest business report, it focuses on the external restriction that would act as a ceiling for short-term growth. “With net reserves in the Central Bank in the order of US $ 3,500 million (without counting SDR) and external public and private commitments in the order of US $ 6,700 million until the end of March, the transition weeks between 2021 and 2022 have been an ordeal for companies that need to purchase and pay for imported products, with an increasingly selective currency apportionment by Banco Central ”, he maintains.
Wheat and soybean exports seem to be going through a good season in terms of volume (wheat) or prices (soybeans, with increases of 10% in recent weeks). However, Vasconcelos insists that “the lack of supplies and parts would already be affecting the level of activity, after the reduction of the previous months, and also inflation, due to the impact of the shortage on prices.” In his opinion, this precariousness at the start of 2022 confirms the perception of two very different scenarios. depending on whether or not an agreement with the IMF is reached in the first quarter, although “the outline of an economy under the umbrella of the Fund is far from being a panacea”.
Even with everything “under control” the uncertainty appears again and again. To the ancestral climatic risk of the Argentine economy at the time of La Niña (saved or ruined more than once by a “good harvest”) are added the development of the international situation, the impact of an agreement with international organizations, the evolution of the pandemic and, when not, the good or bad practice of those who must find consensus and support for the policies that cross this minefield. Nothing less.
