Economic analysts expect higher inflation, a higher dollar, lower growth and more deficit than the Government estimated in the budget in 2021

Highest dollar. Higher inflation. Less growth. More deficit. This is how the differences that economists and market analysts present with the vision that the Government has for the country’s economy in 2021 are synthesized.

The projections of consulting firms and private banks, revealed in the Latinfocus Consensus Forecast report, are somewhat more pessimistic than those that Minister Martín Guzmán and his team set out in the Budget that comes to Congress today, according to official sources in this medium. The differences occur both in the depth of the 2020 crisis and in the scope for action to boost the recovery.

According to analysts, economic activity will fall by 11.5% in 2020, thus completing its third consecutive year of GDP contraction. For 2021, meanwhile, a rebound of 5.3% is expected, somewhat less than the 5.5% defined by the ruling party.

Martín Guzmán sent the budget to Congress and defined that in 2021 there will be a primary deficit of 4.5% of GDP

In turn, the consulting firms estimate that this year will close with a primary fiscal deficit of 9.3% of GDP, a figure higher than the one that the Government itself validated in its last decree of budget modification for 2019, when it validated a primary red of $ 2 , 2 trillion for this year (equivalent to about 8% of GDP).

For next year, both projections discount an adjustment to reduce the deficit, although they differ in their size. While the 2021 Budget projects a red 4.5% of GDP, as anticipated by Guzmán, private analysts consider that next year it will close with a deficit of 5.9% of GDP (1.4 points more).

According to Matías Rajnerman, chief economist at Ecolatina, the goal of 4.5% of GDP « is achievable. » «For this year we estimate a deficit of 7%, so the 4.5% in 2021 is an adjustment, but with some reactivation of activity that strengthens income a bit and some spending that can be adjusted, especially in IFE and ATP, it is compliant. Perhaps there may be some negotiation with the IMF there.

However, the analyst warns about the path beyond next year. “The current one is a lax but achievable goal. But 4.5% in 2021 and fiscal balance in 2022 is not the same as having 2% the following year.

The big difference appears in inflation. The Government estimates that, even with the economy rebounding after the 2020 crash, inflation will continue to decline and will be below 29%. The projection looks optimistic when compared with the considerations of private analysts, who discount an acceleration of inflation: they project 38.7% for this year and 45.9% for 2021.

« They are underestimating inflation to generate extraordinary resources, » economist Gabriel Caamaño, director of the Ledesma Consultancy, told LA NACION, critical of the budget numbers. « And we should see the adjustment formula that remains in terms of pension spending, if it is not also to show a slightly better result, » he added.

At this point, Ecolatina’s estimates point to an inflation of 40% by 2021. «It has to do with a dollar that aims to be higher, with tariff corrections that will have to be made after the freezes that were extended this year and that many 2020 wage negotiations were kicked into 2021 by the pandemic, ”explains Rajnerman.

Another divergence appears in the estimate of the official exchange rate. In the Budget, the Government proposes that the dollar in the official market will reach $ 101 (the saving dollar would exceed $ 131, if 30% of the PAIS tax is added).

Meanwhile, the consulting firms estimate a greater devaluation of the peso, associated with the higher expected inflation. According to the report, the dollar will hit $ 86.16 this year and close 2021 at $ 119.89. With this value, the saving dollar would reach $ 155.86.

Regarding other variables, the economists surveyed by Latinfocus estimate a growth of 6.1% in consumption (after a contraction of 12.7% this year), a recovery of 6.7% in industrial production (they estimate a drop of 11.7% for 2020) and a rise of 10.3% in investment, after the collapse of 26.8% calculated for this year.

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Courtesy La Nacion