the expectations of what's coming

The inflation forecast for this year has increased compared to last month, rising from 44.8% in December 2018 to 47.5%. At the same time, the output of the Argentine economy is expected to fall by 2.4% in 2018, compared to an earlier estimate of 2.5%, according to the Central Bank of the Argentine Republic (BCRA) on the basis of: Survey of Market Expectations (MER) performed monthly.

On the other hand, the 55 respondents estimate on average that the dollar will reach $ 39.60 in December and $ 48.9 at the end of 2019, far from the figure forecast in the 2019 budget.

Real wages will then continue to fall sharply, although this variable is omitted from the questionnaire conducted by the monetary entity.

L & # 39; inflation

For 2018, inflation was estimated at 47.5% from one year to the next, an increase of 2.7 percentage points compared to the September survey (which had shown an inflationary expectation of 44.5%). On the other hand, underlying inflation (average increase in unregulated prices) expected at the end of the year is 48.0% (+4 p / w compared to the survey last month).

For 2019, analysts' inflation expectations were set at 27.8% from one year to the next. (+0.8 percentage points) and 26.8% for the core (+0.9 percentage points). In 2020, the EMR inflation forecast was 19.6% year-on-year (+0.6 p.p.) and 18.0% for core inflation (+0.5 bps).

For the first quarter of 2019, the expected monthly inflation rate is 2.4% and 2.2% for the core.

Fall of economic activity

Compared to the real gross domestic product (GDP) for 2018, a contraction of 2.4% is expected towards the end of the year. For 2019, analysts expect real GDP growth of -1.0%, down -0.5 percentage points from the September survey, as well as budget projections indicate a contraction of 0.5%. The expected economic growth forecast for 2020 is 2.4% (+ 0.2%).

Interest rate (Leliq)

The average interest rate for November is 68% (benchmark interest rate based on Letras Líquidas – LELIQ – in pesos at 7 days), an increase of 3 percentage points compared to the expectations of the last month.

Similarly, a trajectory is expected that will begin to slowly decrease from December 2018 until reaching 35% in December 2019 (maintaining expectations for this last level compared to the previous survey).

This may interest you: Financial Bike II: The second parts have never been good, but it will be worse

Based on the average of the REM projections, the Leliq rates for December 2018 and for the next 12 months are 64.78% and 42.68%, respectively.

In this way, the monetary "turnstile" that constitutes a double-edged sword in a recession-based economy containing a dollar based on an adjustment and an abominable debt will continue for several months, according to the expectations of the agents consulted.

Exchange rate

With respect to the nominal exchange rate, the forecasts for all periods examined decreased slightly. Those consulted expect that in December 2018 the retail dollar will average $ 39.3 per dollar and in December 2019 will reach $ 48.9 per dollar.

Although the trajectory shows more moderation vis-à-vis the vertiginous change in the exchange rate, a correlation with inflation is maintained, which guarantees the necessary measure for the devaluation guaranteed by the government. be effective from the point of view of capitalist profitability.

Salaries

The issue of wages is not consulted in the survey. However, the inflationary pace contrasted with the slow evolution of wages (although several unions have begun to demand the reopening of parity) indicates that the decline in purchasing power registered by Indec will continue.

According to the agency, wages rose 21.9% in August from the same month in 2017, while prices rose 34.4%. A loss of 12 points.

Similarly, the wages of the agreement lost between 10% and 20% in the third quarter of this year compared to 2017. If this rate is maintained, the independent CTA estimates that the loss of salary of 2018 will be the worst since 2002.

The Market Expectations Survey (MER) consists of a systematic follow-up of the main short- and medium-term macroeconomic forecasts generally made by specialized analysts, local and foreign, on the evolution of certain variables of the Argentine economy. by the Central Bank of Canada. the Argentine Republic (BCRA).

As stated by the BCRA, the forecasts of 55 participants were taken into account, including 34 consultants and local research centers, 14 financial entities in Argentina and 7 foreign analysts.