Argentina will experience a bad year of economic restructuring in 2024, but the worst side effect of medicine will soon pass. The patient gets up in 2025.
According to the economic forecasts at the end of 2023, the Argentine economy, or at least GDP growth, would not suffer even half of the misfortune that struck Brazil in the years of the Great Recession of 20152016.
Last year, Argentina's GDP is expected to have shrunk by 1.4%. According to estimates from consulting firms and other institutions of the Central Bank of Argentina (BCRA), GDP would fall by 2.6% in 2024. For economists in Itaú, Brazil, it is 2.5%. In 2025 there would be growth of around 2.5%.
The adjustment would have been very cheap. During Brazil's Great Recession, GDP fell by 3.5% in 2015 and 3.3% in 2016.
How would it be possible?
Predictions are what we know they will almost always be wrong, although some of them are useful and it is inevitable to do this work. In the Argentine case, things look even worse.
In addition to a history of instability that dwarfs even chaos like that in Brazil, Argentina now suffers from obvious insecurity that prevents us from even seeing next month.
There are two huge and improvised packages of measures that, with hundreds of articles, are upending not only the economy but also the country's laws in several areas.
The essence of the economic package, if one can see the center of this chaotic fog, is to reduce the central government's nominal deficit to zero and to severely suppress labor income (salaries) and social benefits.
Nominal deficit: includes primary expenses (pensions, servers, investments, machine maintenance, etc.) and interest expenses. This means eliminating a nominal deficit of 5.2% of GDP (about 3% of the primary and about 2.2% of the interest account). It's brutal.
A small change means that about 5% of total social security spending, a third of subsidies (electricity bills, transport, etc.) and a fifth of other social benefits will be cut.
The remainder of the bill would be completed with a tax increase of more than 2% of GDP in a recession year.
If the benefit adjustment is lost to inflation, it becomes easier to achieve a true zero deficit. It will cost the lives of the common people “de la gente”.
The inflation forecast for 2024 is 213%, not significantly different from that recorded in 2023, according to BCRA estimates.
For this to be the case, it is necessary that there is no further rise in the dollar, that prices and exchange rates are contained even with a negative real interest rate, and that the ugly wage suppression works that is, on average, with patience, Argentines become poorer .
It may be that after so many years of economic misfortune, Argentinians will suffer in silence. Who knows? Speaking of which: A general strike is planned for January 24th.
Apart from the teratological catastrophe in Venezuela, Argentina competes with Brazil and Ecuador for the title of worst economic performance in South America in the last decade or two.
Between 2013 and 2022, Argentina's GDP per capita fell by 4.9%, as did Ecuador's. Brazil's fell 2.4%. Colombia grew by 21%; in Chile 10.4%. In troubled Peru, an increase of 14.7%; in Uruguay more than 15.3%; in Paraguay 18.9%.
In other words, even if the predictions, which sometimes seem exotically optimistic or exorbitant, were confirmed, Argentina would start from a low base, from a rock bottom, just as we slowly emerged from there last year, still with mud on top Ground nose.
If the predictions are correct, it will definitely be cheap, we repeat. It seems very unlikely.