A scenario in which the free dollar continues to rise and inflation shows a significant increase, after it climbed to 8.4% in April, leaves a latent tension in the economy in the middle of an election year. around this situation, new forecasts of strong rises for the official exchange rate and prices in general for the end of 2023 were published.
According to the world report of May FocusEconomicsbased on projections of more than 40 experts from national and foreign banks and consultancies, a growing trend for dollar values and inflationin a framework in which the Central Bank does not have net foreign currency in its coffers.
Therefore, the estimations of the experts acquire greater importance in a situation of growing distrust due to the mismatch of the variables that are key for the economy, and also because of the imminence of the change of government due to the presidential elections.
Thus, analysts perform a negative x-ray for the next few months.
“Argentina will have the worst performance in the region this year. GDP will fall amid runaway inflation, a peso in free fall, dwindling savings and sky-high interest rates. Global headwinds and a painful drought will make matters worse , as well as the remarkable uncertainty in the run-up to the general elections October”, details the international survey.
To conclude that the debt default risks “extremely high further cloud the prospects.
Economists’ forecasts for the price of the dollar for the end of the year continue to rise.
More inflation and lower activity
Therefore, this discouraging panorama leads to the fact that the economists projections for the coming months are worrisome.
The consensus of analysts surveyed by FocusEconomics indicates that the economic activity would contract 2.4% in 2023which means a decrease of 0.5 percentage point compared to the estimate made last April.
Regarding inflation, the highest data of the last month, where the consumer price index (CPI) climbed 8.4%, alerts that this variable climbs more than expected.
“Inflation is projected to average notably higher this year than in 2022, amid the depreciation of the peso and monetary financing of the fiscal deficit. Volatile energy prices and fiscal largesse ahead of October elections are key risks”summarize the economists in the report.
In this way, the FocusEconomics panelists see that the inflation will increase 108.4% on average in 2023which represents an increase of 5.6 percentage points with respect to what was forecast a month ago.
What will be the price of the dollar, for economists
As for the expected price for the official wholesale dollar for the end of December, The economists surveyed show a worrying upward trend, in an environment where the drought shows a drop in the foreign exchange settlements of the field harvest, which may decrease by some US$20,000 million compared to last year’s sales .
The high inflationary inertia, the escalation of free dollars, the shortage of foreign currency in the BCRA and the elections put pressure on the official exchange rate.
“He weight should lose more ground amid the prolonged monetary financing of the fiscal deficit”, sentences the survey.
In short, The consensus price for the US wholesale ticket for the end of the year is $391, a figure that represents a rise of 28 pesos (7.7%) compared to the price expected for December in the previous report (April)..
So, if you get to the 2023 epilogue with this projection for the value of the wholesale dollar, the cumulative currency devaluation throughout the year would be 121%. A figure higher than the forecast inflation of 108.4% for the same period.
Equals the projected figure in FocusEconomics consensus ($391) is trailing well below the value being traded in Matba-Rofex futures and options market trades. There, a big jump in the price of the wholesale dollar is expected by the end of December, since the price of the contracts for the end of the year is $538. In other words, 147 pesos more (37.6%) than in the report.
To take into account, today the wholesale dollar is trading at $231.1Therefore, it would “need” to rise to more than 69% until the end of the year to reach the consensus expected by economists.
Highest price expected by economists
From the point of view of the prices for the wholesale dollar projected for next December by the local and foreign experts surveyed in the report, the dispersion of values is increasing and reaches almost 150%, since they start from a minimum of $261 to a maximum of $645.
The consensus of the wholesale dollar price of the economists surveyed by FocusEconomics estimates $391 by the end of the year.
Regarding the highest forecasts for the price of the official wholesale exchange rate for the end of the year, the ranking is led by the consultancy Eco Go, with an estimate of $645. Then come C&T Asesores ($516), MAP ($507), Econviews ($491) and Empiria Consultores, with $487.
“We see that the rise of prices of these two months accelerated the nominality of the economyand that is why we are raising our expectations for the exchange rate, assuming a shock at the end of the year, and also for inflation, which would accompany that shock,” he told iProfessional Sebastian Menescaldi, economist and associate director of Eco Go.
For his part, Maria Castiglioni Cottereconomist and director of C&T Asesores, affirms that by the end of the year she expects $516 because you are looking also the change of government.
“Even in our base scenario, where the government manages to avoid a lack of strong devaluation, the pace of crawling peg (slow and continuous depreciation) will be above 7% per month, but probably already in December there will be a bigger change. It is a figure in which they are already touching the blue and the cash with liquidation”, details the expert to iProfessional.
From the perspective of Jerome MontalvoEmpiria Consultores economist, the wholesale exchange rate will touch $487 at the end of the year because it will follow a average monthly inflation “somewhat higher than 8%, so that 2023 would close at around 145%, implying that in order not to continue appreciating in real terms, and to recover some of the lost ground, that the exchange rate should close above 450 pesos per dollar towards the end of the year.”
Precisely, the figure of $450 is what is expected for December Pablo Repetto, Head of Research at Aurum, because “we believe that a new government, whether pro-government or opposition, is going to have to establish a exchange rate adjustment with a discrete jump correction, to try to begin to correct distortions in relative prices that subsist today”.-
