Argentina Economic Forecast

Following a domestic demand-led deterioration in the economic performance in Q4 2022, the economy likely remained in the doldrums in Q1. Inflation climbed further, while the peso continued to depreciate noticeably. Additionally, consumer confidence remained deeply downbeat. Compounding matters, exports fell, interest rates soared, and there was a severe drought. Moving to Q2, two additional rate hikes in April and still-depressed consumer confidence, together with a plunging peso, spell trouble for activity. Additionally, the country’s reserves were at their lowest level in nearly seven years in early May due to drought-hit agricultural exports and interventions in the FX market to support the peso. In response to dwindling reserves, the country signed a deal with China in late April to pay Chinese imports in yuan.

Inflation rose to 108.8% in April, following March’s 104.3%, marking the highest inflation rate since our current records began. Inflation is projected to average notably higher this year than in 2022 amid a depreciating peso and monetary financing of the fiscal deficit. Volatile energy prices and fiscal largesse ahead of October’s elections are key risks.