How much will the dollar and inflation reach in 2022
More inflation. Less growth. less deficit. Higher interest rate. Devaluation acceleration. That’s him base economic scenario for 2022 projected by banks, economic consultants and financial entities at the beginning of the year, according to the estimates compiled in the latest publication of the Latinfocus Consensus Forecast.
This monthly report, which takes into account more than 50 forecasts from local and foreign firms, marks an important slowdown in the growth of the level of activity. After the almost 10% increase in GDP in 2021, associated with the rebound and the low base of comparison due to the 2020 crash, consensus is expected to increase by 2.3% by 2022.
“GDP should grow at a noticeably slower pace this year, since the effects of a favorable basis for comparison vanish. What’s more, weak consumer and investor confidence, in a context of prolonged macroeconomic imbalances, they will restrict growth”, says the report, led in its Argentine chapter by the economist Massimo Bassetti.
Among those consulted, the firm Analytica presented the most optimistic forecast (4% growth), while the minimum value was raised by Eco Go (0.5%).
“We think the economy may grow 3% in 2022, but it is pure statistical drag from 2021. And it slows down because the economy has to make fiscal and exchange rate adjustments, which ends up being negative for wages,” he says. Andres Borenstein, Chief Economist at Econviews.
“In this scenario, January and February will not be bad months, but when this adjustment occurs there will be bad months, although later the economy begins to recover because the exchange rate adjustment generates a positive effect over time. But without an agreement with the IMF, that 3% remains very optimistic”, poses the analyst.
According to Econviews, the dollar will close 2022 with a value of $174.70, a figure that is above the market consensus. According to Latinfocus, The projection is that the official exchange rate will end the year at $158.76, value that is below last month’s estimates ($160.39). By the end of 2023, the estimate is that the dollar will reach $217.91.
Among the particular projections, the rating agency Moody’s is the one that presented the lowest devaluation forecast ($134.47), while its peer Fitch was at the top end, with a higher rise in the dollar that would take it to $181.05 by the end of the year. of 2022.
In that scenario, too an acceleration of inflation is noted, which will have 50.9% of 2021 as a floor. Between inertia, the higher rise in the dollar and the movement of regulated prices such as utility rates, analysts find a combination of factors to explain this acceleration.
The consensus of the firms surveyed by Latinfocus marks an accumulated inflation for 2022 of 51.4%. The figure, in turn, accounts for a rise in projections associated with the acceleration in the rise in prices in December: 30 days ago, the consensus among economists predicted that the CPI in 2022 would be 49.8% (45.2% was estimated in the survey 90 days ago).
The estimate of inflation The lowest was presented by the rating agency Fitch Ratings (32.9%, almost in line with the 33% that the Government had estimated in the failed 2022 Budget), while the largest increase was raised by Econometrics (60.8%).
According to Borenstein, who projects 58% inflation by 2022, There are three factors that have a direct impact on the acceleration in the rise in prices and explain why there will be no disinflation this year. “Number one, we see a significant devaluation, so that will inevitably have an effect on prices. Rates will also have to be raised in real terms, and that will also have an impact, both in the first round, when the increases are applied, and also in the second round, because it generates cost increases,” explains the economist.
Finally, the analyst warns about the effect of the BCRA’s monetary policy and the need to finance the Treasury deficit. “The third factor, which is the most important because it is structural, is that in 2022 you are going to have a lot of monetary issue again. We have a fairly benevolent estimate, of a primary deficit of 2.5% of GDP and 4% including interest. The market is going to give you 1.5% financing, and you are going to have to issue 2 points”, proyecta Borenstein.
“In addition to issuing 2% of GDP, an agreement with the IMF will ask you to buy dollars, because today you have no reserves, and that is bought with monetary issue, and you also have to issue to meet the maturities of Leliqs and passes. ”, says the analyst, who finds in BCRA liabilities a factor by which inflation favors the Government: “If you sterilize many pesos with Leliq, a snowball effect begins to be generated, and that is avoided with inflation, because it liquefies the stock”.
As for the fiscal accounts, the consensus of firms surveyed by Latinfocus foresees a slight reduction in the deficit. According to the report, andThis year the financial fiscal red (includes the payment of interest on debt) will be 4.7% of GDP, and it is estimated at 4.3% for 2022.