2024-03-21 07:39:54
Although he recognizes that inflation “is still high,” the president Javier Miley He asserted: “we are on the right path towards normalizing the inflation rate.” He is confident that activity will have “a strong rebound” when the exchange rate is lifted.
He said he imagines that in the next 100 days, the country will be economically “better than today without a doubt, with less inflation.” And the level of reserves will be “much higher,” as he pointed out in a brief dialogue with Ámbito.
After the rise in inflation in December, when the consumer price index reached 25.5%, a slowdown was observed in both January and February. In February, a variation of 13.2% was recorded and the leading indicators for March show that inflation for the current month could reach a level similar to the previous one. If it occurs, it would be a result that would be evaluated as favorable since March is a complicated month due to seasonal issues (impacting school expenses, change of season in clothing, among other factors).
Regarding the possibility of lifting the restrictions, the Government has been carrying out various steps to obtain external financing of 15 billion dollars. The official strategy is, according to the aforementioned medium, to obtain aid of around 5,000 million dollars from the International Monetary Fund (IMF), the same from a friendly country and smaller contributions, close to 1,000 million dollars, from different investment funds.
However, one element to take into account is that the eventual expansion of indebtedness with the Fund will require the approval of Congress (article 2 of law 27,612, which was promoted by former minister Martín Guzmán).
What were the first 100 days like?
In its first 100 days, the new Government managed to rebuild reserves (in December they were negative by about 11,000 million dollars) and calm the dollar – the gap between the official exchange rate is around 22%.
The aspect that the Government stands out most is the primary and financial surplus that it achieved, through a strong adjustment, with a year-on-year reduction of 36% in real expenditures, in what was the largest spending cut in the last 30 years.
However, this surplus was achieved on the basis of decreases in spending. Particularly, in February retirements and pensions had a real year-on-year drop of 38% and capital expenditures decreased 87.9%.
At the same time, a marked drop in activity is observed. In January, cement shipments decreased 20% and car registrations decreased 33%, to name just two indicators.
In the Casa Rosada they trust that, by maintaining the fiscal surplus, “inflation will collapse” sooner than many expect. Likewise, they are confident that with measures such as the lifting of the stocks, as noted, “activity will have a V-shaped recovery” as the year progresses.
However, different investment groups that have visited the country recently, and even the International Monetary Fund, have raised the need for the new administration to obtain “political consensus” that gives sustainability to the reforms it is promoting. The IMF, in particular, was emphatic about the need to “preserve the most vulnerable sectors.”