Until three months ago, 2018 promised to be the year in which “the curse of the even years” would be broken, the stop and go cycle in which Argentina is involved for 7 years: the economy grows in odd years, partly driven by public spending prior to the elections, and deflated by peers, when the policy adjusts the items over-executed in the previous cycle.
The last time that Argentina registered two consecutive years of expansion was in 2010/2011. Last year, the GDP grew 2.9% and the forecast for this year was that it would grow 3%. The drought, the devaluation, the adjustment of public spending to lower the deficit, the acceleration of inflation that will make purchasing power fall and the lower growth of our largest buyer -Brazil- force recalculate. For the Ministry of Finance, the economy will grow 1.4% this year. For private analysts, the figure will be lower: it ranges between 1% and -0.5%, which would bring Argentina back to the recession it had left at the beginning of 2017. In the first quarter of this year the GDP grew 3.6%. It was the fifth consecutive quarter in positive territory. All analysts agree that the second and third quarters will be negative. The discrepancy arises around the fourth, where some see chances of recovery-in line with what the Government foresees-and others believe that the slump will continue.
The Analytica consultancy estimates that this year the GDP will fall 0.5%. “The devaluation has more recessive than expansive effect, generates acceleration of prices and this impact on consumption, added to a framework where the deficit cut is accelerated. When we analyze prospects, the only component that benefits quickly is exports, but the jump is not immediate. It generates improvements, but Argentina lacks much competitiveness, “says economist Rodrigo Alvarez. “We had already projected a bad second quarter due to the effect of the drought, now we add the third and fourth where all these elements will be pasted, especially the drop in consumption. We went from having a growth scenario of 1.5 to 2% to another where it will fall 0.5% on average “.
From EcoGo consulting, Marina Dal Poggetto anticipates that “in the second quarter we expect a collapse in the level of activity, worse than in the second quarter of 2016. The second quarter will be 2 points and peak below the first and third still will fall against the second. The question is whether the room stabilizes. We manage with two scenarios: in one, the economy falls 0.4%. In the other there is a recovery in the fourth quarter and the GDP ends at 0%. “
According to the economist AgustínD’Attelis, director of Agora Consultores, “we are going into a recession. Most likely the year ends in negative terrain, although there is still a very slight chance of growth. Keep in mind that we came with a statistical drag of 1.4%. The disaster that we are going through is eating the floor. We are going to end the year with a clear stagflation, with an inflation around 35% but that can continue to rise according to what happens with the dollar in the coming days “.
Ecolatina estimates that “activity would grow less than 1% in 2018 driven only by the positive statistical drag that left 2017 (+ 1.3%). In other words, there will be no genuine growth. “
Jorge Vasconcelos, director of IERAL, is one of those who bet that there is still room to grow. “Due to the impact of credit restrictions, particularly for SMEs, the loss of purchasing power due to the inflationary shock and the slowdown in public works, a GDP variation of between 0.5% and 1% seems reasonable. To the extent that the financial variables stabilize and some of the uncertainties mentioned are cleared, the recovery may be firm towards the latter part of the year, because, unlike the 2016 recession, the economy is now much better equipped. on the supply side, due to the increase in investments (18.3% year-on-year in the first quarter). The reaction capacity of sectors such as tourism or regional economies may surprise, “he says.
The forecast of ACM is that after the growth of the first quarter there will be a slowdown in the second and third, estimated at -1.3%, with a recovery of activity in the fourth quarter. “In this way, Argentina would grow approximately 0.4% in 2018,” they say.