Argentina Economic Outlook. March 2023

Summary

2023 is a year with a heavy electoral calendar, in a context of growing social concern regarding macroeconomic imbalances and a historic drought. We expect sustained pressures in the FX market throughout the year, with consequences on the GDP and financial volatility.

Key points

• Key points:
• In 2022 GDP grew 5.2%, but fell in the last quarter, triggering a negative statistical carryover for 2023, which, together with the worsening of the drought, led us to modify our GDP growth forecast for this year from -0.5% to -2.5%.
• Inflation rose to 94.8% in 2022 and accelerated again in the first two months of 2023, illustrating the intensity of the current inflationary process. No substantial improvement in expected for the coming months. Thus, we forecast that the price increase will reach 105% in 2023.
• The 2022 primary fiscal result (-2.4%) complied with the IMF target, thanks to a delay on payments and higher export duties due to the “soybean dollar”. Maintaining this strategy is more challenging in 2023 because the drought will slash at least 0.5% of GDP in tax revenues. We expect a fiscal deficit of 2.6% this year.
• The Central Bank is facing a persistent fall in reserves so far in 2023, as a result of the multiple exchange rates prevailing in the economy and the effect of the severe drought, which will imply a significantly lower amount of dollars from exports of the agricultural sector.
• In March, the Government implemented a voluntary debt swap that allowed clearing 57% of the peso debt maturities for the period March-June 2023, postponing their payments to 2024 and 2025.

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