Argentina Economic Outlook | December 2022

Summary

The main macroeconomic imbalances, specially the fiscal one, have been curbed in the second half of 2022 after the change of Economy Minister. It will be crucial to maintain this dynamic during the next election year. The current drought entails a severe risk for the agricultural sector and the exports of 2023.

Key points

• Key points:
• Global growth will slow down in 2023 and world GDP is expected to grow only 2.3%. Monetary tightening and price pressures, amid a background of war and trade barriers, will weaken labor markets and private consumption. Risks are skewed toward a more severe slowdown than expected.
• In Argentina, economic activity performed better than expected in 2022 and would close the year with a 5% annual growth. This growth was driven by consumption, the recovery of sectors affected by the pandemic and an industry that was not held back by the lack of fuel as previously thought.
• The fiscal deficit slowed down since the arrival of the new Minister of Economy, and the IMF target for 2022 could be met. However, it seems more difficult to meet in 2023 it due to the fact that it is an election year. In addition, the Central Bank ceased direct monetary assistance to the Treasury, although it has been intervening (since October) in the secondary market of government securities to support their parities.
• Although there have been signs of deceleration in recent months (mainly in food), we expect inflation to remain at a similar pace to this year in 2023. The government seeks to avoid an exchange rate jump at all costs, so we forecast that it will maintain multiple exchange rates and tighten import controls.
• Risk factors for 2023 include the challenging peso debt maturity profile that the government will have to face, considering the difficulty to obtain long-term financing, and the drought that is reducing wheat yields and threatens the soybean harvest.

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