2023-11-18 04:10:00
The economic scenario of these elections is much more complex than in 2019. Archyde.com
Whoever wins in this Sunday’s runoff, the scenario that the new government will encounter on December 10 will be complex and will present many challenges.
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The 2019 presidential elections were also full of controversy surrounding economic policy proposals. Today the problems are similar, but some numbers are very different, for the worse:
The magnitude of the rise in the general Indec price index has been a topic of debate in each election of the last decade and this is no exception. In the 2019 elections, when Alberto Fernández (Frente de Todos) won against Mauricio Macri (Together for Change) with 48.24% of the votes, year-on-year inflation was 50.5% (October 2018 to the same month of 2019) and the monthly CPI advanced at a rate of between 2% and 5 percent.
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The scenario today is much more delicate. The last measurement prior to the ballot showed that between October 2022 and the same month of this year the CPI had an increase of 142.7%, almost three times more than in 2019. In addition, in August and September the highest monthly variations were recorded. high since the exit of convertibility. Then, there was a slowdown in the pace of increases in October (the CPI was 8.3%), but even so the index doubled those measured before the last elections.
If the official exchange rate is taken into consideration, it is observed that on the last business day before the general elections in October 2019, the dollar was trading at $60 in Banco Nación. Last Friday the sale price was $369.5. I rose 515.8 percent in four years.
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In the run-up to the 2019 elections, the dollar accumulated a rise of 58.4% in the previous twelve months. On this occasion, the jump in the exchange rate was 119% in one year.
Another point of analysis that the dollar offers is the situation regarding restrictions (the exchange rate). Before the 2019 elections, monthly purchases of up to USD 10,000 will be allowed and after the elections the restriction was tightened to a limit of USD 200 per month. Today the number of people who are still eligible to acquire the USD 200 quota is minimal. For the majority of the population, the trap is absolute.
Few macro variables are as perceptible to the population as unemployment. In that case, according to the Indec labor market report, these elections come with much more encouraging data, with a rate of 6.2% of the labor supply, a value that shows a downward trend, both in relation to the previous quarter as well as in the interannual comparison.
In 2019 the scenario was more critical. Before the presidential elections, the unemployment rate was 9.7% (data from the third quarter of that year) at the national level. In the previous and subsequent measurements, rate values higher than 10% of the economically active population were observed.
Directly related to the previous point – although they do not always go hand in hand – is the employment index. In this case the differences are not so great, but the current scenario is still more favorable. In the run-up to the 2019 elections, the occupancy rate was 42.6%, while currently it is 44.6% of the population.
In addition, formal employment has accumulated more than 30 months of continuous growth and during recent months there have been historical maximum peaks of registered wage earners, public employment and monotributistas.
The comparison is unfavorable for the present in the case of informal jobs and the purchasing power of the salaries of the basic and total food baskets, which determine the poverty and indigence thresholds.
A derivation of the indicators reviewed in the previous points is the increase in poverty levels in the country.
In 2019, before the elections in which Alberrto Fernández finally won, poverty reached a value of 35.4% of the population -data at the end of the first semester-. In the run-up to the runoff, however, the poverty rate was at 40.1%, and private studies placed it higher. That is to say, there are more and more people working, but there are also more people who do not earn enough to cover the cost of a Total Basic Basket (CBT) reported by Indec.
The number of homeless people also worsened. Official statistics indicate that in the run-up to the 2019 presidential elections the rate was 5.5% of the population. Today, it amounts to 6.8% of the inhabitants, which implies that there are more people who do not have sufficient income to cover the cost of a food basket (CBA).
According to the results published by Indec, the Gross Domestic Product (GDP) is today 2.2% smaller than in 2019 in real values, with data corresponding to the second quarter of each period.
It is important to remember that between both elections the pandemic took place and that the slowdown in activity, as a result of health measures, caused a sharp fall from which not all sectors have completely recovered.
Furthermore, this year the drought of the last season had a strong negative impact, which conditioned the pace of work in agroindustry and related sectors. In fact, the Monthly Economic Activity Estimator (EMAE) shows a cumulative fall of 1.6% in the first eight months of the year.
The level of the monetary policy reference interest rates is very important when explaining how economic activity is behaving, because the Central Bank seeks to regulate the pace of inflation by discouraging consumption and encouraging savings. Although it also determines the outlook for bank credit.
While Mauricio Macri and Alberto Fernández competed for the presidential seat, the Central Bank’s reference interest rate was 68.9%, with annual inflation that was around 50%. Today, the reference rate is 133% and the latest annualized inflation data marks an increase in the CPI of 120% in the last twelve months.
According to data published by the BCRA, in the days before the 2019 presidential elections the entity had reserves for a total of USD 43,551 million, today it is only USD 21,167 million.
The mentioned values correspond to the totals in gross bilevels, but if the net figures of the Central Bank are considered, the numbers today are singularly negative.
To a large extent, the fall in reserves is associated with the trade balance deficit, but this indicator also shows a different trend when comparing electoral periods.
When the 2019 elections were held, Argentina accumulated a positive trade balance of USD 11,265 million in the first ten months, the result of the difference of USD 53,848 million for exports and USD 42,583 million for imports.
This year, exports amounted to USD 56,580 million, but much more was also spent on imports (USD 63,976 million), which is why the trade balance accumulates a deficit balance of USD 7,396 million. The drought also had a lot to do with this indicator, which seriously compromised grain exports.
Reviewing the results mentioned previously, these differences can be found in the electoral periods:
– 12-month accumulated inflation: 2019: 50.48%; 2023: 120 percent;
– Dollar: 2019: $60; 2023: 369.50 pesos;
– Unemployment: 2019: 9.7% and 2023: 6.2% of the labor supply;
– Employment: 2019: 42.6% and 2023: 44.6% of the population;
– Poverty: 2019: 35.4% and 2023: 40.1% of the inhabitants;
-Destitution: 2019: 5.5% and 2023: 6.8% of the population;
– Gross Domestic Product: 2019 rise 0.6% and 2023 fall 4.9% (compare latest data corresponding to the second quarter with respect to the previous year);
– Interest rates: 2019: 68.9% and 2023: 133% annual nominal at 30 days;
– Reserves: 2019: USD 43,551 million and 2023: USD 21,167 million, in gross terms;
– Trade balance balance: 2019: USD 11,265 million and 2023: deficit of USD 7,396 million.
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