March inflation will be around 7%, according to the estimate of the consultancy Ecolatina. The main impact would be from the clothing and education items, as well as from the entity alerted to the risks of “stagflation.”
«When Alberto Fernández mentions the phrase of the inflation war, inflation in March of last year, when the war broke out in Ukraine, was 6.7%. In February it was 6.6%. There were no advances and for March we are expecting a number close to 7%“, commented Santiago Manoukian, Ecolatina economist.
He explained that March is a month that «It has specific increases such as clothing and educationwhich together with an inflationary inertia that has been growing over time due to the shocks that the economy has received and due to a lack of monetary and fiscal policy that tries to anchor expectations going forward.
Said for the year they are projecting inflation of 100%. “The sensation is clearly worrying because there is little fiscal space on the part of the government to be able to cover the population outside the parities,” he said.
Regarding the employment situation, he indicated that “last year, for the fifth consecutive year, real wages fell but registered wages, both public and private, remained fairly stable. Those who are suffering the most are the informal«.
“We hope that poverty be in a number close to 40%. With inflation led by food, which we are seeing inflation of 7% in March, is bad news for the electoral aspirations of the ruling party,” Manoukian said in radio statements.
What is the impact of the drought
Regarding the agricultural sector, he argued that “the drought is dramatic. Every week it seems that it is even worse because the estimates continue to be cut.
He asserted that “this is going to have multiple causes. The first and most important thing is that stresses the exchange scheme that the government tries to implement with the progressive devaluation, which is the alternative to avoid a one-jump devaluation. It is the Achilles heel of the government’s strategy.
“They are close to 20 billion dollars those who are going to lose the Argentine economy from agriculture. Despite the flexibility by the IMF, the most worrying thing is the level of reserves that you have and we hope for the next few months to be able to defend the exchange rate.
In addition, he explained that “it complicates the goal of reducing the fiscal deficit because you collect less from export duties, in January they already fell 30% in real terms. It affects economic activity because it has a direct impact. The fall in soybeans and corn already subtracts two points from GDP.
«You have less foreign currency from the main sector that generates it, so there is less room to let go of the sectors that need it, such as commerce and industry. The drought puts pressure on the price of fresh food, restricting imports puts pressure on the prices of some markets“, he indicated.
But he also warned that “the government had promised companies that had agreed to Fair Prices, better access to the foreign exchange market to be able to import, the question is with which dollars. I think there are multiple impacts that I think the market is still not appreciating. We are not sizing well the impact that the drought will have.
«There is no margin for a small plan because the problem is who finances it. You have a limit to be able to issue within the agreement with the IMF and for what is imposed by the organic letter of the BCRA. If you want an expansion with respect to the fiscal path, you should have financing that is not there. Argentina is going to experience stagflation this year,” he said.
«From 2012 onwards the economy has stagnated and in per capita terms the GDP contracted 12% prior to the pandemic. We have an inflationary inertia that causes the process to be encouraged by contracts that tend to accelerate, shortening their duration and including adjustment clauses with past inflation. The government has to continue adjusting rates on public services that will continue to hit you in the price index“, he finished.
With information from Argentine News
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