According to the report of BBVA Research “Argentine Situation” for the second quarter of 2024, the fiscal balance is the cornerstone of the economic program. The Government has managed to accumulate a financial surplus of 0.4% of GDP so far this year, a better than expected result, although now the challenge is to guarantee the sustainability of this dynamic in the future, replacing distortive taxes and consolidating the spending cut. .
Inflation has been on a downward path from the peak of 25.5% in December 2023 to 4.2% in May. The missing relative price adjustments will slow down the decline in inflation going forward. The economists of BBVA They project annual inflation of 140% in 2024.
In a scenario of acute monetary astringency, the national government has initiated a process to manage the liquidity of the economy through short-term Treasury bills (LECAP) instead of passive repos from the BCRA. Towards the end of the year, BBVA Research estimates that real interest rates are already in slightly positive territory.
The correction of the country’s macroeconomic imbalances deepened the recession in the economy. The economists of BBVA Research In Argentina they expect the reactivation to begin in the third quarter of the year. For 2024, an average drop in GDP of 4% per year is expected, and a recovery of 6% in 2025, driven by investment and the reactivation of private consumption.
The external accounts will improve in 2024, due to the drop in imports due to the recession, the recovery of agricultural exports in a year without drought and the positive balance of the energy sector due to lower purchases of imported gas and an increase in exports of Petroleum. The surplus balance of the energy sector is expected to approach $4 billion (while last year it was neutral).
Among the risks present for the current economic dynamics, one of the main ones would be a decrease in social support that makes fiscal consolidation (the pillar of macroeconomic policy) difficult, which could hinder disinflation and exchange rate stability.
