IBP will continue two years of decline for the first time since 2002

The larger-than-expected decline in March's business data released last week has led several badysts to reduce their estimate of the GDP trend for this year. There is virtually no doubt, even in the official corridors, that this year will end with a further fall in the economy of at least 0.8%, due to a downward slide by the Ministry of Finance. Thus, it will occur for the first time since the collapse of convertibility, in 2001 and 2002, Two consecutive declines in annual GDP: the 2.5% drop in 2018 and the one that ends in 2019.

"The relapse of March and the likely continuation of the cooling of April require us to recalculate the GDP projections for 2019. We estimate that the economic contraction of the current year will exceed 1%"said Federico Muñoz.

Also from LCG, they said that with the 2.4% negative drag that had left 2018 and an activity that did not end up touching the ground, they adjusted the downward activity projection for this year: they expect a fall of at least 2% over a year.

However, The economic dynamics of the 2001/2002 crisis are different from the current one. Muñoz said that the magnitude of the falls is very different. Indeed, the cumulative decline between 2000 and 2002 reached 15%, whereas between 2017 and 2019, the GDP would eventually accumulate a decline of 3.5%.

Camilo Tiscornia, CyT Advisors, stated that the situation is completely different. "The strongest thing is that it was in a context of convertibility and dollarization of the economy that has nothing to do with what is happening today, especially in 2001," he said.

In addition, "At that time, there was the exchange rate that was behind, not now, which was quite problematic, had not met the banks, corralito and corralón, and today the banks are not a source of problems; and at that time, there was 10 years of convertibility, then after the weighing, there was no more indexing mechanism, people were not indexed as quickly. "

Now, instead, he pointed out that there is "a brutal drought, since a good part of the fall of last year is linked to this poor harvest. "He identified a similarity:" a complex political context although the current context is not so complex. During those years, there was a lot of instability. The starting point is not bad, but there is a lot of uncertainty about what can happen with the change of government. "Another point of coincidence was" the budget deficit that prevailed: the end of convertibility was a very irresponsible fiscal policy of Carlos Menem, that Fernando De la Rúa could not get back on track. "

In the external appearance, In 2001, the world deteriorated a lot. "Brazil has devalued a lot, the United States had very high rates," said Tiscornia. Now, "we are not in such a negative international context".

Gabriel Zelpo, from Elypsis, who pointed out that the situations were very different, coincided with Muñoz in that heThe magnitudes were very different, with starting points is different.

"It started with huge unused capacity and unemployment. There was no inertia in inflation, the devaluation was much larger and the low inertia was important for the subsequent recovery, "he said.