Argentina’s inflation to reach 147% in 2023, GDP could fall up to 3.5% – economist

BUENOS AIRES (ICIS)–The annual rate of inflation in Argentina is expected to average 147% in 2023 as the country prepares to choose a new president in December, an economist said on Tuesday.

Carlos Perez, from Argentina-headquartered Fundacion Capital, said the current government presided by Alberto Fernandez – who is not seeking re-election in December – has as its only economic target to avoid a further depreciation of the Argentinian peso (Ps).

Meanwhile, the economist said the country’s GDP could fall by 3.0-3.5% in 2023, year on year.

The International Monetary Fund (IMF) still forecasts growth of 0.2% for Argentina in 2023.

That depreciation would push inflation higher. In April, the rate of inflation stood at 108.8%.

Perez was speaking at an event organised by the Latin American Petrochemical and Chemical Association (APLA).

The currency’s official exchange rate has devaluated more than 100% in the past 12 months. On Tuesday, it stood at $1:Ps242.20.

A year ago, the exchange rate stood at $1:Ps120.61.

However, few Argentinians have access to that exchange rate in the current economic downturn.

The high rate of inflation has created an unpredictable exchange rate system, with multiple US dollars valuations used for different economic sectors.

The dollar rate which most Argentinians can have access to – the blue dollar – is currently trading at $1:Ps481.

The country has also created the “dolar soja” (soybean dollar, from the income generated by Argentina’s key soybean exports) or the “dolar turista” (tourist dollar).

Currently, there are as many as 12 exchange rates for the dollar. The financial newspaper Ambito Financiero keeps daily track of them; see them here.

The current economic downturn was aggravated at the end of 2022 and beginning of 2023 by a severe drought which affected agriculture, a key economic sector in the country which also serves to bring in dollars into the country.

The Banco Central de la Republica Argentina’s (BCRA’s) dollar reserves are at lows, another added issue.

“The government will get to December with several added problems: a high debt with the IMF [the country’s public finances are being sustained by a bailout from the Washington-based body], the risk of a severe recession and the BCRA’s dollar reserves at minimums,” said Fundacion Capital’s Perez.

“The future months will not be easy for Argentina. What the country needs is a new deal with the IMF [to continue sustaining its public finances], a severe fiscal adjustment and a depreciation of its currency.”

The APLA Logistics conference runs in Buenos Aires on 6-7 June.