IMF predicts a 5.8% recovery for Argentina’s economy, but private companies estimate it could reach 8%

The International Monetary Fund (IMF) revised upwards its estimate of the recovery of Argentina’s economy, but this time it would have been insufficient. The 5.8% estimated by the international organization is well below what could end up happening. Martin guzman had already indicated that this year activity could rebound by 7%, but Private sector economists estimate that it could even expand further, to levels close to 8%.

Favorable data for the economy released by INDEC last week led to an upward revision of the estimate of the future of the economy for all of 2021. Economists such as Adrian Yarde Buller They are among those who believe that activity could end up surprising on the upside and approaching 8%. “Activity has picked up a little faster than expected in recent quarters. Much of the achievement of this prognosis will depend on the level of restrictions imposed by contagions ”. Your diagnosis is shared by other specialists.

Data for January showed a sharp increase of 1.9% from December, well above expectations. While it is true that some seasonal issues can have an impact, the data left a much higher growth floor for 2021 than previously estimated. Andres Borenstein, Director of Econviews, also estimated a recovery of 7%. However, he warns that this is not a large number, as there would still be a significant stretch to recover whatever was lost during the pandemic.

The restrictions will not affect, at least at this stage, the sectors that contribute the most to GDP, such as industry, wholesale and retail trade and construction.

The great slowdown that the Argentine economy suffered between April and May 2020 due to the total closure of activities due to the quarantine caused a drop of 9.9% of the GDP. The improvement of the last months of last year left a “statistical brake” of 6% recovery for this year. This means that even if the economy remained totally ‘flat’ this year, that level of rebound would still be verified, compared to a lousy 2020. January data left this floor much higher again.

The IMF estimate suggests that the recovery in activity will be quite short. In fact, this suggests that after 5.8%, in 2022 there would be another rebound of just 2.2%. In other words, in two years of improvement, not everything that was lost in the year of the pandemic will not have been recovered.

The government is now taking close attention to ensure that restrictions that will be enacted amid the second wave of COVID-19 infections have a more limited impact on the economy. The aim is to avoid relapse as much as possible and not to interrupt the recovery that has been emerging in recent months.

The strong recovery that activity showed in January consolidated a much higher reactivation floor for 2021. It will now be necessary to carefully monitor the activity restrictions that are set to mitigate the second wave of Covid-19 infections

For it, The measures will not affect, at least at this stage, the sectors that contribute the most to GDP, such as industry, wholesale and retail trade and construction. But no one can be sure that there won’t be further restrictions in case the second wave grows more than expected. In this case, the scenario would become more complex, because not only would there be a stronger impact on activity, but it would also force the monetary stake to exceed forecasts, which would have negative consequences on the exchange rate and the economy. inflation.

Of course, the high price of corn and soybeans will also have a strong impact from this quarter. There will be more movement in the agricultural sector, which also has a significant weight in the gross product and the dollars that come in will help to prolong the stability of the exchange rate.

The IMF itself has recognized that the world will grow at different rates. Countries that progress faster through immunization will experience a stronger recovery and leave the effects of the pandemic behind more quickly. For this reason, developed countries will have left the crisis behind this year, while emerging countries will take much longer.

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