The Argentine economy: a forecast for 2022 and a guess for 2023

ARGENTINA - Forecast 27 Apr 2022 by Domingo Cavallo

It is extremely difficult to forecast the Argentine economy for the remainder of the presidential term of Alberto Fernandez, in spite of the macroeconomic program that is being supported by the IMF through a 45 billion dollar EFF. The main difficulties originate in the new global circumstances created by the Russian invasion of Ukraine that took place after the IMF program was negotiated, and especially, in the unsettled political conflicts between Argentina's president and vice president.

In the forecast we will assume that the president continues to support his Economic Minister, Martín Guzman, in implementing the announced macroeconomic program. And, that the IMF will provide the waivers necessary to continue to disburse the funds to service the 2018 IMF loan despite any possible deviations from the agreed targets. Therefore, we assume Argentina will not default on its debts with the multilaterals.

Under those assumptions we disagree with the inflation forecast in the recently published IMF World Economic Outlook, as well as with the upper limit of the negotiated target for 2022 (43%), and with the 51.4% rate forecast for the same year. Our inflation forecast for 2022 is 70%, which is also higher than the rate reported in the April 18th Market Expectation Survey (60%).

On economic growth we agree with the revised forecast of the IMF in the World Economic Outlook, which is 4% for the year, one percentage point higher than our February estimate.
We predict that two of the three main targets set in the IMF EFF program, the fiscal primary deficit (2.5% of GDP) and the monetary financing of the Treasury (1% of GDP), will be met if measured as a percentage of nominal GDP.

Finally, it will be difficult for the government to meet the foreign reserve accumulation target, particularly given the increase in the cost of imported gas because of the war in Ukraine, which is larger than the expected increase in exports of soya, cereals and minerals.

For 2023 we guess that the annual rate of inflation will be at least as high as during 2022, and that GDP growth will be zero or negative.

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