November 27, 2022

Brighton Journal

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2022 Better or Worse ?: What are the GDP and inflation expectations if the IMF signs the deal?

Martin Guzman and Miguel Bess

If Argentina signs an agreement with the International Monetary Fund (IMF), will next year be better or worse than 2021?

Quantity The answer is simple: no; It will be a year with low economic growth and high inflation, with a drop in real wages.

There are all the artillery of the government to sign the agreement shown by some political marketing activities (Ministerial meeting). Martin Guzman The strategy that the company claims to do “mea culpa” before signing another agreement with CGT) and are as determined as stopping interfering with the equivalent exchange rate and reducing the subsidy to “tourism dollars”.

The cuts to tourism payments are aimed at providing negotiating materials ahead of an immediate deal with the IMF (Analytica), even if it affects the electorate’s elusive middle class.

In this sense, the consulting firm Analytica has confirmed that “suspending the payment of fixed installments of overseas travel and travel expenses by credit card is an additional measure implemented within the framework of the central bank’s public policy. Maintenance of reserves”.

“Although it affects the middle class, which is elusive in the election, it aims to provide a negotiating outfit in the face of an immediate agreement with the IMF.. As with any debtor, the fund must somehow protect the currency from the debtor, and that is what is happening, especially after the ruling party’s election defeat, “the advisory firm said in a statement. Ricardo Delcado.

Previously, the BCRA adjusted tariffs on imports and “stopped interfering with its own securities in the dollar market -CCL- releases its price”, Analytica added, after using US $ 2,360 million for this purpose from October 2020.

Nobel laureate Joseph Stiglitz and Minister Martin Guzman
Nobel laureate Joseph Stiglitz and Minister Martin Guzman

Does that mean agreement will occur ?; Not necessarily, but they are the basic conditions for the technical talks that will begin this weekend in Washington Led by the Argentine representative to the body, Sergio Sodos.

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Speculations and speculations about the possibility of the agency agreeing to grant exceptional credit in 2018 or for the friendship between its managing director will no longer come to an end. Kristalina Georgieva, And the Nobel Laureate and Guzman’s intellectual godfather, Joseph Stiglitz.

Of course, it is fair to ask another question: What would the future be like if that country did not sign this agreement to repay the $ 44 billion debt?

“After the agreement with the International Monetary Fund, the best thing the government can do is to find 4% or 5% more nominal per month” (LCG)

And the answer may be short: in principle, worse than the situation with the agreement All available financial resources will be closed, Such as the World Bank and the Inter-American Development Bank (IDB).

Based on these sources alone, the Ministry of Economy estimates that it will enter a net worth of $ 12,000 million by 2022; Analysts warn that without that money, it would not be possible to calculate the outcome of a similar cash crunch to offset next year’s fiscal deficit.

The government can legally raise its heart to underline the strong economic recovery this yearThis is higher than the estimate of private analysts, as it will coincide with the sharp 10% drop recorded in 2020 due to epidemic and isolation. But by 2022, according to a recent Latin Focus report, analysts’ forecast is about 2.2% and the government is rating 4%, while the IMF is betting 2.5%.

Martin Guzman with Sergio Sodos and Julie Kozak at a meeting at the IMF
Martin Guzman with Sergio Sodos and Julie Kozak at a meeting at the IMF

As with other events, discussions about the name of this process have already begun: whether it will be a “re-emergence” or “real growth”, but regardless of different opinions, the data associated with inflation will be significantly lower this year. It is possible 51% higher by the end of this year And it could be 60-70 percent.

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In this regard, a report by the LCG study nailed the head, indicating that the price freeze was ineffective as the main weapon in the fight against inflation, as shown by the early November results.

After the agreement with the IMF, the best that the government would like is about 4% or 5% per month (LCG).

“Once again, inflation was above 3% in November. The two-month debate over prices for such bad results does not seem to have been a big success.

“Despite the freezing rate of food, the continuing recession, the freezing rates and the exchange rate of fuels and the lack of very energetic activity, inflation does not result in less than 40% per annum,” the study said. Guido Lorenzo.

“After an agreement with the International Monetary Fund, the best thing the government can do is to find a nominal value of 4% or 5% per month.“Once mentioned, anchors will not be used as an anti-inflationary policy,” he warned.

LCG criticized the ineffectiveness of the freeze to control inflation
LCG criticized the ineffectiveness of the freeze to control inflation

As a result, there will be inflation “In the range of 60% to 80% by 2022”, counter Up to 33% of the budget projected by the government.

“Inflation at this level, at a higher rate than it currently is, is reopening the supply crisis and putting pressure on growth.”

For this reason, “Wages are expected to be lost again next year against rising prices And finishes adjusting government spending and liquidating Social Security revenues.

The government has already begun this adjustment, saying, “If the situation is properly communicated to the community and all actors are uniformly progressed, the plan could be smooth and avoided, resulting in a more reactionary fiscal policy. Address ”, indicated LCG.

“Without dollars in view, the rapid recovery of 2021 will not be proven in 2022. The need to get out of the two firm anchors that have been active this year will ensure higher inflation next year” (EcoGo)

“Minister Martin Guzmிறார்n emphasizes the need to consolidate expectations, but he is the one who first misrepresented them and set impossible inflation targets. And, thus breaking contracts ”.

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For this reason, he said, “With this level of inflation, it is very ambitious to think that the economy can grow above the statistical drag. In particular, with negative real interest rates and inflation, its level is already high and intensifying, which may result in lower domestic savings and, therefore, less likely to change the installed capacity. ”

In the same vein, the ECO GO study report states “Without dollars in view, the rapid recovery of 2021 will not be proven in 2022. The need to get out of the two firm anchors that have been active this year (the dollar, tariffs and fuels) will ensure higher inflation next year.”, A finding that seems inevitable compatibility.

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