Argentina’s economy is facing the prospect of a “hard landing” scenario this year as a crop drought deepens expectations of a larger downturn, according to a note published Monday by analysts at JPMorgan Chase & Co.
South America’s second-largest economy is forecast to contract 1.7 percent this year versus the bank’s previous forecast of a 0.5 percent decline. That’s one of the most bearish outlooks for Argentina. Economists surveyed by the Central Bank in January saw 0.5 percent growth this year while the government penciled two percent growth into its annual budget.
JPMorgan economists Diego Pereira and Lucila Barbeito see “stagflation entering a new phase with inflation and growth trends diverging: inflation higher and real growth trending lower,” according to the note.
On top of annual inflation nearing 100 percent, a historic crop drought is worsening the outlook for key commodity exports that boost activity, tax revenue and Central Bank reserves. Pereira and Barbeito estimate the top three crop exports — soy, corn and wheat — may fall this year to US$36.6 billion of shipments down from US$51.6 billion in 2022.
High inflation and worsening harvest expectations are fuelling what the economists call a “recessionary environment.”
by Patrick Gillespie, Bloomberg