Argentina’s economy is teetering on the brink in the run-up to October’s presidential election.
The flight to the US dollar haven accelerated this week after the failure of efforts to replenish depleted international reserves reignited fears of a possible devaluation of the heavily regulated official exchange rate.
The damaging mix of drought-induced recession and skyrocketing inflation add to the growing market anxiety.
Economic activity is expected to contract by 2.3% this year, and consumer prices are projected to rise more than 100%, according to the median (central) estimates of 32 economists surveyed April 10-19.
Recession forecasts rose to 27 of 32 respondents from just 7 of 23 in January, indicating an increasingly negative outlook.
Opinions ranged from 1.1% growth to a 4.5% slump in 2023.
“The situation is very complicated, but if the government works with the likely winners of the [presidential] primaries, the economy will see an orderly transition,” said Andres Borenstein, an economist at consulting firm Econviews.
“However, the transition will be difficult if the government, which is weak and unable to implement stabilization plans, does not cooperate after the primaries.”
The date for voting on party candidates has not yet been set.
In the past, the naming of candidates has preceded major financial meltdowns weeks before the general elections.
President Alberto Fernández and other Peronists trail opposition candidates in voter polls.
IWF AGREEMENT CRITICIZED
Earlier this month, the International Monetary Fund gave Argentina a pause by easing targets on its US$44 billion loan, a decision criticized by some Wall Street analysts who believe the Fund is being lenient toward the South American country.
The expiration of IMF aid raises fears about a possible devaluation that would plunge Latin America’s third-largest economy into a crisis comparable to the chaotic periods of 1989-1990 and 2001-2002.
Conditions are already extremely difficult after years of inflation spiraling out of control and stretching families’ budgets to the limit.
Social protests and homeless people sleeping on the sidewalks are now common in Buenos Aires.
Despite a much brighter outlook, the economies of Brazil and Mexico – No. 1 and No. 2 in the region, respectively – are not exempt from problems as growth cools, and the cost of living continues to hurt.
Brazilian GDP is forecast to grow 0.9% this year and 1.5% in 2024, a net downgrade from the 0.8% and 1.9% growth rates expected in the January survey for the two years.
The recent appreciation of the Brazilian currency has had some negative effects, making Brazilian exports more expensive and leading to larger current account deficits that weigh on the economy.
For Mexico, the growth outlook was revised slightly from 1.0% and 1.8% in January to 1.5% this year and 1.6% in 2024, still well below the government’s more optimistic scenario of 3.0% growth.
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