Andrés Randazzo 
The Monthly Estimate of Economic Activity (EMAE) ended 2022 with annual growth of 5.2%. The economy has therefore consolidated two straight years of expansion for the first time since 2010 and 2011, over a decade ago.
However, according to a report by the National Institute of Statistics and Census (INDEC), the deseasonalized indicator showed a 1.2% annual drop in December and a 1% reduction against November –in the month-to-month comparison, it accumulated four consecutive negative months.
Experts say the cooldown in activity in late 2022 will continue in the early months of 2023. Various factors will cause potential economic stagnation, they say –something several private reports have already observed in January.
“When looking at the closing numbers for 2022 we see negative statistical inertia. And looking ahead, the lack of dollars will become more acute due to the worsening prospect of bad soy and wheat harvests, so it’s going to be very difficult for Argentina to show any growth this year,” said economist Jorge Neyro.
“We can expect stagnation and a complicated first semester, because that’s when we’ll notice the lack of foreign currency liquidation and its impact on economic activity. The second semester will be dominated, in part, by the electoral scenario. But it’s hard to imagine seeing positive growth this year,” he added.
Lautaro Moschet, an economist at the Libertad and Progreso Foundation, said he was expecting “the trend from the last quarter of 2022” to hold. “The post-pandemic rebound has ended and now we are seeing the actual economic activity situation,” he said. “The country has been stalled for more than a decade, with constant ups and downs, but can’t stabilize and walk a steady path of growth,
“In addition to the Argentine economy’s own rigidity, due to its regulations, taxes, and outdated labor legislation blocking the creation of new jobs, we are starting to suffer the onset of shock from the drought. In December, you can see that the “Agriculture, livestock, hunting and forestry” [sector] presented the sharpest interannual drop, with 18%,” he said.
“Looking ahead, you get the intuition that this will be a year of adversities leading to recession. On the one hand, the climate element will result in million-dollar losses for farmers (and for the government too, as they will have less fiscal resources from tax collection). On the other hand, electoral uncertainty will paralyze investors, as they will prefer to wait and see what happens after October,” Moschet pointed out.
Sources at the consultancy LCG said that “the last four months of the year saw consecutive drops in the level of activity, accumulating 2.8 percentage points compared with August (the last month with growth). Since the fourth quarter has already gone badly, the statistical inertia for 2023 would be a negative 0.5%”.
In that scenario, they stated that “in 2023 we expect activity to be negatively affected by a series of elements. Primarily, by the drought itself, but also by the resultant drop in dollar income (US$ 8 billion at a minimum) because of reduced exports, which will lead to reduced availability of dollars for imports. Therefore, the effects on industry’s operational capacity will be felt more than last year.
“On the other hand, with rising inflation hovering around 95-100% inter-annual, there is little hope of recovery in wages, and therefore, consumption. In summary, we project a drop of around 2% annually, on average,” said sources at LCG.
Mining grows, agro shrinks
According to INDEC, ten of the sectors that form the EMAE grew inter-annually in December, including Fishing (15.5%), Hotels and restaurants (10.8%) and Mining and Quarry Exploitation (10.8%).
The Mining and Quarry Exploitation (10.8%) had the greatest positive impact on the EMAE’s interannual variation, followed by Real estate, business and rental activities (2.3%) and Hotels and restaurants (10.8%).
The Agriculture, hunting, livestock and forestry figure showed the largest drop in the year-on-year comparison, with 18%, followed by the Manufacturing industry (2.1%) and Wholesale, retail and repair business (1.1%): the three together contributed 1.41 percentage points to the EAME’s interannual drop.
