The renowned financial firm was skeptical about the fulfillment of the fiscal goals with the IMF in the middle of an election year and with a Kirchnerist government. It anticipated that inflation will double that budgeted, and activity will enter a recession.
The most important bank in the United States, the firm JP Morgan & Chase, published its Global Outlook with the main projections for the world’s economies in view of 2023. The forecasts for Argentina represent a bucket of cold water for the desires of the Fernández government , since it is estimated that each and every one of the proposed goals cannot be met.
The bank concluded that year-on-year inflation for December 2023 could climb 111% on the retail price segment, practically double what was reflected in the Budget by Sergio Massa‘s economic team. In fact, this scenario suggests a certain optimism compared to the prospects of most local private consultancies, which expect even higher inflation.
In any case, year-on-year inflation should consolidate comfortably in the 3-digits over the next year. These results are consistent with a monthly inflation level of around 7%, a figure that is very distant from 4.4%, which is compatible with the prognosis of the ruling party.
The controls on retail prices and regulated rates do not represent a credible and sufficient nominal anchor to be able to achieve the objectives set by Massa, so the goal of 60% by December 2023 really seems an unattainable number.
Likewise, JP Morgan estimated that economic activity will fall by at least 0.5% over the next year. A part of this estimate is due to the statistical drag on the outlook for the second half of this year, which suggests the beginning of the recession.
The economy could fall in the last months of 2022 and the first few months of 2023, to then remain virtually stagnant in a typical stagflation scenario, thus producing a negative annual variation in the growth rate.
The financial firm did not hide its doubts about the fulfillment of the quarterly goals with the International Monetary Fund. It assured that its compliance constitutes a “challenge” in the middle of an election year and in the face of a government that did not hesitate to expand fiscal policy during the midterm elections in 2021.
The latest projections for year-on-year inflation and economic growth do not include the effects of a possible default, since if the external debt refinancing process were to occur and collapse, the scenario could become even more adverse.
The agreement determines that the primary fiscal deficit (without interest) of the National Public Sector must close this year at 2.5% of GDP, to fall back to 1.9% in December 2023. Direct monetary financing via “advances transitory” must end in 2022 at 1% of the product, and be completely canceled for next year.
With information from La Derecha Diario