Argentina Economic Outlook. Third Quarter 2022

Summary

The deviations from the targets agreed with the IMF triggered a deterioration of expectations and the economic situation, deepened by political tensions. Economic activity will slow down more than expected in the coming quarters.

Key points

• Key points:
• Global inflation remains at high levels and central banks are accelerating interest rate hikes. The global economy will slow significantly, contributing to the decline in inflation, although it will remain above targets in the short term.
• In Argentina, during 2Q22, deviations from IMF targets materialized stronger and faster than anticipated, deteriorating expectations about the economy.
• The fiscal imbalance deepens with respect to 2021, leading to higher monetary issuance to finance it. This puts further pressure on inflation, which has been accelerating since 2021 in the lack of a price stabilization plan.
• The shortage of international reserves will likely trigger new FX restrictions and an acceleration of the crawling peg of the official exchange rate. In addition, we forecast several interest rate hikes in the coming months, but always below inflation expectations.
• We revised our GDP growth forecast from 3.5% to 2.5% YoY for 2022.

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