Industry and construction in Argentina grew in 2021, but generate doubts for the next few months

RIO DE JANEIRO, BRAZIL – In a year in which the restrictions due to Covid were lifted one after another, the industry managed in 2021 to recover the bad numbers it had had in 2020.

Industrial manufacturing production (IPIM) showed an accumulated growth from January to December of 15.8%, with respect to the same period of the previous year. Meanwhile, construction activity had an annual increase of 30.8%.

Both data were published by the National Institute of Statistics and Census (Indec) in its reports on the Manufacturing Industrial Production Index (IPIM) and on the Synthetic Indicator of Construction Activity (ISAC).

Regarding industry, the official statistical agency also pointed out that the index of the seasonally adjusted series showed a positive variation of 0.6% in December with respect to the previous month.

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The Ministry of Economy, meanwhile, pointed out that the IPIM has been rising for fourteen months.

In addition, it was added: “The accumulated growth for the year 2021 was +15.8% year-on-year. This is the first increase after 3 consecutive years of decline. The industry recorded the highest level for a December since the beginning of the series in 2016″.

Matías Kulfas, Minister of Productive Development, emphasized on his Twitter account, that the industry had the best December in the last five years. “It grew 10.1% against 2020, 15.9% with respect to 2019 and 17.6% with respect to 2018. It was even slightly above 2017 and 2016, prior to the crisis that started in 2018″, he stressed.

However, Camilo Tiscornia, director of C&T Asesores Económicos, remarked that the evolution of the second part of 2021 there are several ups and downs.

“There was some loss of momentum, after the recovery following the closures due to covid in April and May. Already the level of production is very similar to the last peak there was, which was in 2017; that is to say that the pre-pandemic levels were already exceeded,” explained the economist.

Gabriel Caamaño, economist at the consulting firm Ledesma, stressed that the industry in December recovers against the previous month (+0.6%), but still does not finish recovering the fall of October.

“It is still sawing around a level of activity that is higher than pre-pandemic, but still lower than the pre-crisis period 2018-2019. In particular, December is still 0.5% below September, which is the post-pandemic peak,” he said.

For her part, Natalia Motyl, an economist at the Libertad & Progreso foundation, noted some stagnation in manufacturing production in the last quarter of the year.

“Monthly growth continues to be driven by the reactivation of certain activities, such as oilseeds, which remained paralyzed in the last month of 2020 because of the government’s economic restrictions due to the pandemic. There is also a decline in chemical products such as agrochemicals and paints compared to December 2020 due to a drop in demand. In terms of seasonally adjusted products, there is a deceleration from November to December”, she analyzed.

In the case of construction, Caamaño explained that the apparent lower dependence on imported inputs allowed a better performance in the second half of the year, which allowed it to have a new post-pandemic high in December.

“Even so, the picture is similar to that of the industry; that is, it is above pre-pandemic levels, but still below what was exhibited in the pre-crisis period, of 2018/2019″, said the economist.

For Motyl, moved by the growth of public investments in the last half of the year, construction showed a good performance from November to December.

“New public works plans boost the future prospects of the sector. Although, it could be affected in the coming months by macroeconomic instability, A recession of the economy is expected in the second quarter of the year,” she concluded.

The big question is what may happen this year in both activities, in the midst of key variables such as the exchange rate, inflation and the negotiation with the International Monetary Fund (IMF). For Tiscornia, it is complex and the risks are high.

“Without an agreement with the Fund, the exchange rate cannot be sustained and inflation will be higher. Now, with an agreement signed, short term time is bought, although afterwards it is necessary to see what will happen with the drought and if the soybean dollars will come in in April”, said the economist.

According to Tiscornia, in the event that an agreement is reached with the IMF, it will be necessary to see if the goals will be met on a quarterly basis and if the agreed amount will be disbursed.

“Much will also depend on whether the agreement will allow the Fund to deliver some more money up front, such as the US$4.5 billion of last year’s SDRs. That would give a little more strength, but as long as the soybean dollars appear. Still, the risks for this year are high,” he said.

Motyl, on the other hand, commented that there will be a loss of momentum in manufacturing production as of the second quarter of the year, due to the increase in the cost of financing for the private sector and macroeconomic instability. “The construction sector will not suffer so much because public works will drive its”, said the economist.