Argentina Economic Outlook. June 2023

Summary

The macroeconomic scenario deteriorated due to the strong impact of the drought, which substantially reduced agricultural exports, with negative effects on GDP and tax revenues.

Key points

• Key points:
• We forecast a GDP variation of -3.5% for 2023 due to the impact of the drought on an economy that was already showing weak performance. For 2024, we maintain the forecast of -2.0%, due to the expected correction of macroeconomic variables.
• Most of the provinces will hold their local elections ahead of the national elections. The first results already available (almost 26% of the national electoral roll has voted) show a relevant role of local political spaces and a lower participation of the population, while the parties associated with the ruling coalition (Frente de Todos) lost votes with respect to 2019, Juntos por el Cambio improved its outcome and La Libertad Avanza had poor performances.
• The retraction of fiscal revenues, together with a drop in public spending that is not enough to offset it, entailed a deterioration of the primary fiscal result, which we estimate will end 2023 at -2.6% of GDP. The deviation from the target agreed with the IMF (-1.9%) will not be a reason for disrupting the IMF program.
• Monetary issuance to cover fiscal needs and purchase Treasury bonds in pesos remains at high levels, exceeding 1% of GDP so far this year, which is driving FX and inflationary pressures on the economy.
• Inflation has significantly accelerated. We forecast that it will reach 145% in 2023. By 2024, the CPI is expected to increase by 120%, due to the effect of corrections in utility prices and the FX rate.

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