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ECONOMY | 08-03-2024 10:48

Analysts improve outlook for Argentina, forecast inflation slowing to 210% in 2024

Experts consulted for Central Bank’s REM survey of market expectations lower forecasts for inflation in the next few months, predicting 15.5% rate for February and a 3.5% economic slump this year.

Analysts are offering a more positive outlook for Argentina’s stuttering economy. 

Ahead of the official figures for February inflation, experts consulted by the Central Bank are forecasting 15.5 percent for last month and 210.2 percent for the whole year.

The predictions, detailed in the Central Bank’s latest REM (Relevamiento de Expectativa de Mercado) survey of market expectations, are a drop of 2.2 points on previous forecasts while the annual inflation projection dips 16.9 points from 227 percent.

As for this and future months, they project 14.3 percent for March, 12 percent for April and 10 percent for May with inflation finally reaching single digits in June at  8.5 percent, remaining in that territory in July (7.8 percent) and August (seven percent).

The specialist forecasts are in-line with the diagnosis of the Javier Milei government. Both the President and Economy Minister Luis Caputo have anticipated last month’s inflation to be around 15 percent.

"When December gave 25 percent, it was a success because the truth is that prices retreated in the second week. This month [referring to February] it seems that inflation will be 15 percent,” assured Milei at the Expoagro 2024 event this week.

C&T Asesores consultants have placed last month’s inflation at 16.3 percent, thanks in part to food and beverages (11 percent) slowing down but "transport went up last month, electricity bills registered a significant increase as from mid-month and the pay of janitors went up 38 percent, all movements way above the average."

Along similar lines the Fundación Libertad y Progreso think-tank measured February’s price increases at 16.8 percent or 40.9 percent for the first two months of this year at an annual rate of 288 percent, “the highest since March, 1991." They also harped upon public transport fares.

According to Eco Go consultants, the month’s cost of living advanced 15.9 percent while “food prices seem to have consolidated around three percent weekly," calculating the latter at 14.6 percent for the month. Forecasting the exchange rate for March, the REM analysts also forecast an average of 860 pesos for this month, 49 pesos below the previous survey, with an annual increase of 150.9 percent, 14 percentage points lower than before.

As for the next few months they tip 927.80 pesos for April, 1,010.60 pesos for May, 1,111.50 for June, 1,191.60 for July and 1,273.90 for August. The jump between March and April would thus be 9.7 percent, almost five times the current devaluation of the Central Bank.

The REM experts project Gross Domestic Product slumping 3.5 percent below 2023, 0.5 percent worse than their January estimate with the fall concentrated in the first quarter of this year.

"For 2025, the REM participants estimate an annual growth of 3.2 percent on average," concludes the Central Bank report.

Data released Thursday showed that consumer prices in Buenos Aires City rose 14.1 percent in February – a fall of more than seven points from the 21.7 percent registered the preceding month.

City Hall’s General Directorate of Statistics and Census also reported that inflation over the last 12 months in the nation’s capital stands at 264.5 percent.

Of all sectors, food and non-alcoholic beverages increased the most last month at a rate of 14.7 percent, slightly above the general index. Since the turn of the year, food has risen 43 percent.

IMF pressure for poor

The fresh data arrived as the International Monetary Fund (IMF) called on Argentina to strengthen welfare support to prevent the impact of austerity measures "falling disproportionately" on salaries, pensions and the poorest sector of the population.

"There has been progress but the road ahead is challenging, requiring rapid public policy measures,” said IMF Spokesperson Julie Kozack at a press conference this week.

"The effort to protect the most vulnerable is a fundamental pillar of the programme to prevent the weight of the adjustment from falling disproportionately on poor and working families," she added.

Kozack said that "strong fiscal consolidation, the curbing of money-printing and exchange rate policy are yielding results, with inflation starting to come down.

"Why is this important? Because inflation is a tax on the poor. Given the delicate social situation, coupled with the already high poverty rates in Argentina, it will be important to ensure additional social assistance and preserve the real value of pensions," he stressed.

Responding to questions from reporters about continuing speculation that Milei and Economy Minister Luis Caputo will seek a new financing programme with the IMF, Kozack played a straight bat.

"At this stage, our focus remains on supporting policies aimed at restoring macroeconomic stability in Argentina. It is premature to discuss the exact and precise modalities of the programme,” she concluded.



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