Andrés Randazzo 
As economists wait for official data, private consultants estimate that the economy grew by around 5.5% interannual in 2022. However, several reports claim that late last year economic activity showed signs of cooling down. That trend apparently continued during the first month of 2023. Such were the projections of a report by the Mediterranean Foundation’s Institute of Studies on Argentine and Latin American Reality (IERAL) based on January’s tax collection data.
Projections for this year show the different factors that will cause far more modest growth in activity, including the impact of the drought on agriculture and the erosion of purchasing power due to inflation. In this scenario, for example, analysts consulted in the Central Bank’s Survey of Market Expectations (REM) expect a real GDP growth of 0.5% for 2023.
“Tax collection data for January reflect a continuation of the deceleration in the level of activity that we have started to observe since September of last year, when all government resources showed a drop in real terms of around 2.7% compared to the same month of 2022. To a lesser extent, taxes associated with the domestic market exhibited the same dynamics, with a reduction of 0.1% in constant currency for the same period,” sources at the IERAL pointed out, and detailed that the taxes considered in this indicator were VAT, Debits and Credits, Fuels, Contributions and Contributions to Social Security and Import Duties.
“The seasonally adjusted index prepared by IERAL based on the collection of taxes associated with the domestic market reflects a real drop of 1.2% per month in January, compared to the month of December. It seems to confirm that the economy continues to follow the deceleration path that we began to observe near the end of the third quarter of 2022,” added the study signed by Maximiliano Gutiérrez.
“By extrapolating the behavior of tax collection associated with the internal market based on the trajectory of economic activity, and filling in for the lack of official data for December and January, we found that the EMAE in the last month of 2022 would have had a seasonally adjusted drop of 0.2% versus November, followed by an estimated 0.8% decrease for January compared to the previous month”, the report detailed. It added: “In year-on-year terms, the figures are still positive, but with a significant slowdown. In December, the variation against the same month of 2021 was 1.1%, the same number for January compared to 2022. However, both months grew 2.5 percentage points less than the October-November average –according to the latest official data– and 5.8 points below the January-August 2022 average, which confirms an exhaustion of the post-covid economic recovery”.
When explaining the factors suggesting that economic activity is slowing, the study highlights “the inflationary acceleration observed since last March, since which time it has been impossible to break the monthly lower bound of 5%. This, in addition to the well-known accelerations and decelerations that have occurred in recent months, a situation that affects the purchasing power of aggregate demand and, convergingly, the growing difficulties for the supply of imported parts and pieces, which results in offer restrictions”.
Forecasts
In this scenario, estimates from different private consultancies in recent weeks show how activity may evolve this year. For example, the firm Orlando Ferreres indicated that “projections for this year anticipate a negative result of the product, with unresolved macroeconomic tensions, strong limitations due to the lack of foreign currency and meager private consumption derived from years of contraction of family income.”
For their part, LCG indicated: “We expect the activity to be hurt by the current drought that is affecting the 2022/23 season, which is expected to cause a loss of around US$10 billion, according to the Buenos Aires Grains Exchange. Consequently, with lower supply of foreign currency, we expect stricter import controls, which will affect the availability of inputs for the normal functioning of the industry”.
Meanwhile, Ecolatina forecast for this year “more limited growth than in 2022”, stressing: “We understand that as long as there are no shocks (exogenous or endogenous) a recession could be avoided, but not the trend towards moderated growth.”
When listing some of the factors that will affect a “lean expansion” of the economy, sources at Ecolatina mentioned: “The drop in agricultural production, which will impact, on the one hand, on the level of economic activity because there will be less activity in the sector and its related activities, but in turn will limit the supply of foreign currency throughout the year. Faced with a demanding goal of accumulating international reserves and the aforementioned drought, this type of management of foreign currency shortage will continue, including the continuity (and potential strengthening) of import restrictions, which may impose a limit on the expansion of the domestic market (and certain exports) due to complications in the supply of finished goods, capital goods and inputs. This would affect not only the levels of consumption, but also of investment”.
