The consultant projects an annual inflation of 100% and points out that the Government has little fiscal space to cover the population outside the parities
By iProfessional
18/03/2023 – 21,58hs
March inflation will be around 7% due to the impact of increases in items such as clothing and educationaccording to the estimate of the consultancy Ecolatina, which warned about a “stagflation”.
“When Alberto Fernández mentions the phrase of the inflation war, inflation in March of last year, when the war broke out in Ukraine, was 6.7%. In February it was 6.6%. There was no progress and by March we are expecting a number close to 7%,” said Santiago Manoukian, economist at the entity.
He explained that March is a month that “has occasional increases such as clothing and education, which together with an inflationary inertia that has been growing over time due to the shocks that the economy has received and due to a lack of monetary and fiscal policy that tries to set expectations going forward.
He said that for the year they are projecting inflation of 100%. “The feeling is clearly worrying because there is little fiscal space from the government to be able to cover the population outside the parities,” he said.
March is a month with specific increases such as clothing and education
Regarding the employment situation, he indicated that “last year, for the fifth consecutive year, real wages fell, but registered wages, both public and private, remained fairly stable. Those who have been suffering the most are the informal workers.”
“We expect poverty to be close to 40%. With inflation led by food, which we are seeing inflation of 7% in March, it is bad news for the electoral aspirations of the ruling party,” Manoukian said in radio statements.
The impact of the drought
Regarding the agricultural sector, he maintained that “the drought is dramatic. Every week it seems like it’s even worse because the estimates keep being cut.”
He said that “this is going to have multiple causes. The first and most important thing is that it stresses the exchange scheme that the government is trying to implement with progressive devaluation, which is the alternative to avoid a devaluation in one jump. It is the Achilles heel of the government’s strategy.
“There are close to 20,000 million dollars that are going to lose the Argentine economy from agriculture. Despite the flexibility on the part of the IMF, the most worrying thing is the level of reserves that you have and we hope for the next few months to be able to defend the exchange rate”.
In addition, he explained that “it complicates the goal of reducing the fiscal deficit because you collect less from export rights, in January they already fell 30% in real terms. It affects economic activity because it has a direct impact. The fall in soybeans and corn will already subtracts two points from the GDP”.
“You have less foreign currency from the main sector that generates it, so there is less room to let go of the sectors that need it, such as commerce and industry. The drought puts pressure on the price of fresh food, restricting imports puts pressure on the prices in some markets,” he said.
From Ecolatina warns that the impact that the drought will have is not yet being measured
But he also warned that “the government had promised companies that had agreed to Fair Prices, better access to the exchange market to be able to import, the question is with what dollars. I think there are multiple impacts that I think the market still hasn’t is appreciating. We are not sizing up the impact that the drought is going to have“.
“There is no margin for a small plan because the problem is who finances it. You have a limit to be able to issue within the agreement with the IMF and due to the fact that the BCRA’s organic charter imposes on you. If you want an expansion with respect to the fiscal path , you should have financing that is not there. Argentina is going to experience stagflation this year,” he said.
He said that “from 2012 onwards the economy has stagnated and in per capita terms the GDP contracted 12% prior to the pandemic. We have an inflationary inertia that causes the process to be encouraged by contracts that tend to accelerate, shortening their duration and including adjustment clauses with past inflation. The government has to continue adjusting tariffs on public services that will continue hitting you in the price index”.
