New projections: how much will the dollar and inflation reach in 2021

Can Inflation Be Below 30% This Year? For the government, which estimates it at 29%, yes; but for the market, no. This is demonstrated once again in economic projections: according to a group of nearly 40 consultants, the general increase in the price level will be 47.7% this year.

In other words, if the forecasts consulting firms in the latest LatinFocus consensus forecast, inflation in 2021 would be above 11 percentage points above that of 2020 (36.1%), and not seven below, as the Minister of the Economy, Martín Guzmán has projected.

LatinFocus consensus forecast collects monthly economic projections of about 40 consulting firms and banks. In February, the economy estimates for 2021 are as follows: a growth of PBI 5.2%, a dollar big official which by the end of the year will reach $ 126.48 (and, therefore, will increase by 42%) and a budget deficit of 5.7%.

“The economy will recover some of its losses from last year in 2021 thanks to a rebound in domestic demand and a global economy that is starting to recover as traffic restrictions are gradually lifted, ”says the LatinFocus report.

“However, rising inflation, macroeconomic imbalances and capital controls will have their effect on activity; negotiations on prolonged debt and the slow arrival of vaccines tarnish the scene “, Add.

The data in which the Government and market are aligned is up 5.2%. After a double-digit drop in gross domestic product (GDP), between 10% and 12% depending on who estimates it, the effect of a “statistical carry-over” leaves the calculation relatively easy.

This explains the effect of “statistical report” Juan Ignacio Paolicchi, analyst at the consultancy firm Empiria: “If there was zero growth in 2021, we calculate how much the economy would grow in this way compared to last year, and the data for the last quarter is still taken into account., which, if it leaves a high level, will give growth compared to 2020 ”.

Compared to difference by nearly 20 percentage points between inflation estimates government and market, Paolicchi underlines that private projections are “consistent with the deficit” and that, the higher the latter data – that is to say, the more the expenditure of the State than its income – the more l inflation will be high. “Issue proceeds” and pressure on exchange rates.

“The surplus pesos are not free: will put pressure on the trade gap [la diferencia entre el dólar oficial y el mayorista] between April and September, which in turn can put pressure on the inflation rate due to the transfer to prices, ”explains the Empiria analyst.

In the same vein, Julia Segoviano, LCG analyst, explains that the to get away In inflation expectations it relates to the anchors that were used last year to contain prices. The government has regulated the prices of food, prepaid services and the like, “and they are expected to start rising this year,” the economist said.

“It may be that the government, in view of the elections, finally decide not to lift the anchors; but the anchor of the exchange rate remains “, he explains. In other words, the government could possibly” step on “the dollar and resort to the delay of the exchange rate to contain the price level. very well, Segoviano estimates that inflation will be around 40%.

Yes this strategy starts, the estimate de Guzmán, who projects an exchange rate depreciation of around 25%, well below this projects the market.

“The government trust a lot control the exchange rate and in the agreement on prices and wages, but I’m not that optimistic, “admits Matías Rajnerman, chief economist at Ecolatina.” Inflation will be higher because we have already started with a very high drag; budgetary projections are rather the expression of a will and do not define the rhythm of parities, ”he underlines.

Finally, if there is more inflation, the dollar you will have to keep moving forward so as not to fall behind. “The government will be able to delay the exchange rate, but not as much as it says,” Rajnerman projects. And, in this context, the recovery of real wages will be lower than expected by the Executive. With less money in your pocket, the growth of the economy stalls. “This is why GDP growth will be lower,” said the economist.

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