After the 6.1% collapse of the Argentine economy in the first quarter, some indicators are starting to show that the slowdown may have bottomed out in April. But the recovery in activity will be slow: with the ‘V-shape’ ruled out, economists are now defining forecasts between the ‘pipe curve’ and ‘U-shape’.
The V format was what most excited the government, with the deep fall and rapid recovery of the economy, but reality is starting to reveal something else. “Advanced indicators for April are starting to show a slowdown in the decline in activity, but from very low levels. This is good news, but we understand that it will have to be confirmed as the months go by”, says the LCG consultancy.
Even so, they point out that “there is no clear engine that can drive future V-shaped growth. This type of recovery typically occurs after a supply shock or, in the case of a drop in demand, when investment drives strongly.”
“We do not see the likelihood that investments will take off strongly in the short term because we understand that the ‘wait and see’ view still prevails. The approval of the Base Law could generate some momentum through RIGI, but without major macroeconomic relevance this year. In any case, it could serve as a spearhead to strengthen the recovery process, but not much more”, says LCG.
“Consumption will remain weak. It may bottom out due to a marginal recovery in real wages, but it is unlikely to boost growth in the immediate future. We continue to expect a decline in activity of around 4% this year.”
Economist Ricardo Arriazu said that “the bottom may have been reached in March”, but “the recovery will be more U-shaped”.
“What we expect is a little more like the Nike (or ‘pipe’) curve than the V shape,” says economist Iván Carrino. According to him, the process would last 19 months, which is the average of previous recoveries. “We see that in April the annualized growth rate is 7%, but overall by 2024 GDP will have fallen by 2.5%. The recovery would accelerate if the government was able to pass laws that would help deregulate and privatize the economy. Without these laws, the recovery will probably be a little slower.”
“There is no V-shaped recovery and there never would be,” says expert Martín Kalos vehemently. He explains that the economy is currently moving at two speeds. “Three sectors are growing: mining, energy and agribusiness. The other sectors more focused on the domestic market are in decline and still show no signs of recovery. There is nothing on the horizon that will lift the internal market. Consumption has fallen and there is no way to recover.”
Economist Fernando Marull, director of economic consultancy FMyA, highlights that “the high-frequency data for April are, for the most part, positive, especially in consumption. Added to the fact that agribusiness is starting to gain even more ground, there should already be a monthly recovery. We hope that this year agribusiness will continue to boost, with a harvest that this harvest would increase by 60% annually in quantities. This will also allow a greater flow of imports.”
For Marull, “private salaries and pensions (which with the new formula accumulate a 60% increase between March and April) would have a greater recovery than inflation, and this is fundamental because private consumption represents 75% of GDP” . On the other hand, “investment, which represents 20% of GDP, will not cooperate in the short term, and public spending, which is almost 15% of GDP, will have been adjusted. Therefore, we estimate that GDP in 2024 will fall by 4% on average.”
However, Kalos highlights that “a slight recovery in real wages is not enough because the increase in unemployment and the risk of unemployment will cause families to continue to adjust consumption. In the economy in general, there will be a slight recovery at the end of the year, driven largely by agribusiness, mining and energy, but not by the domestic market. Industry, construction and commerce will continue to be hit hard throughout this year.”
The economic consultancy Estudio Ferreres adds that industry is one of the most affected sectors and that, for the future, “we still do not see clear signs that a recovery in activity can begin. We understand that this will not happen before the adjustment phase focused on moderating inflation gives way to a new phase aimed at restoring family income.”
According to economist Fausto Spotorno, from Estudio Ferreres, “April’s activity data is less bad than March’s, but it will only be in July or August that we will see a recovery”. More than a U-shaped rebound, Spotorno sees the outline of a smile. “We would finish this whole process in May of next year. We are following the historical average of Argentine recessions, which is 20 months,” he told La Nación +.
judi bola sbobet judi bola online judi bola