2023-11-21 21:51:00
The triumph of Javier Miley in the presidential runoff once morest Sergio Massa opens a mystery regarding what the economy holds for the coming months with challenges regarding the evolution of the dollar, the inflationthe relationship with the International Monetary Fund (IMF) and the ailing coffers of the Central Bank.
In order to put a magnifying glass on what is coming, PERFIL surveyed the forecasts of different consulting firms regarding what might happen during the first year of Milei’s mandate, which will begin on December 10.
“Dollarization and the elimination of the Central Bank are not going to happen,” said an economist
Dollar, fiscal adjustment and IMF: the main challenges that Milei will face
Capital Foundationwhose founder is Martín Redrado, predicted greater pressure on the dollar cash because the volume of liquidations by exporters “will suffer prior to a change of government that might improve export conditions.”
Looking ahead to next year, they envisioned three axes on which the libertarian’s economic policy will operate: a exchange rate jump in the middle of a tense gap; a fiscal adjustment which will start from a deficit of three GDP points and without financing; and one renegotiation with the IMF.
Likewise, they predicted a purchasing power “that will reach 2024 in decline, with a weak quality of employment and with 5.2 million more people in poverty since 2016“and detailed that the registered salary decreased “by a real 29.5% since 2017, while the informal salary decreased by 45%.”
What inflation will Javier Milei find?
Regarding inflationary dynamics, Fundación Capital stressed that the economy reaches the change of mandate “with a great distortion of relative prices, the correction of which will require extreme expertise on the part of the new economic team.”
“Indeed, it is expected a exchange rate adjustment that allows reserves to be accumulated once more. At the same time, the necessary correction of the regulated prices of electricity, transportation and fuels is also significant, and might add at least ten points to the inflation of the first monthswithout taking into account the high effects of the second round, at the same time that it will add a profound impact on the income of families, already weakened,” they predicted.
Nor is the view of the state of the Central Bank’s gross reserves optimistic, which As of December 10, they would be at the threshold of 20 billion dollarsthe lowest level since 2005, while net earnings would be positioned in negative territory of 10.5 billion.
External debt payments
Simultaneously, the schedule of debt commitments in foreign currency includes payments for USD 5.9 billion between December 2023 and March 2024between obligations with the IMF, other international organizations and private creditors.
At the same time, between February and April they will expire $16.8 billion in peso maturities, which represents 5% of the national GDP. If you zoom out, the amount climbs to $45 billion (14% of GDP) over the next year.
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For its part, a report by Cohen highlighted that “in exchange matters, the BCRA has no reserves, the exchange gap is very high, The real exchange rate appreciated more than 30% since the PASO and is located 10% below the historical average, a trend that accelerates with the dynamics of inflation.”
In this sense, the specialists of said firm maintained that the post-STEP devaluation of 22% “did nothing other than set a new inflation floor, which went from 6% to 10% monthly.”
Fiscal deficit
However, they stressed that the most important “inheritance” will be fiscal: the outgoing administration will bequeath a primary deficit greater than 3% of GDP, which rises to 5% if debt interest payments are taken into account.
From the perspective of analysts, the economic plan of Javier Miley will contemplate “a strong exchange rate correction that might take the official to $700 by the end of the year –implies a 100% devaluation– although it would not be enough to unify the exchange market.” “For this reason, we also expect more pressure on cash with settlement, which might rise to $1,100, although this implies a substantial reduction in the exchange gap –from 150% to 50% approximately–”, they described.
They assure that “there is a change of era in the field” following Javier Milei’s victory
They warn that the official dollar might rise to $1,000
Regarding the program that the president-elect would deploy, from Wise Capital They judged that a eventual dollarization cannot be implemented at the beginning of the administration of La Libertad Avanza since the consequences “are burdensome.” In this way, they stated that it is first necessary to “prepare the ground and this cannot be done in 2024.”
Regarding the fiscal plan, the investment portfolio manager anticipated that there will be an adjustment although “It is not clear where it will be aimed“since Milei promised in the middle of the electoral campaign not to touch retirements, pensions or social plans, which explain the bulk of public spending.
“Milei said that there is no room for gradualism and this suggests that we are just around the corner of a strong devaluation and possibly without an exchange rate split. We do not rule out a dollar around $1,000and even higher if the transition is disorderly, since that will trigger the exchange rate,” they concluded.
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