• Thu. Feb 29th, 2024

News Eyeo

All Important News

Government and Central Bank are discussing recession based on three economic indicators


Feb 11, 2024

After reviewing several economic factors, the government became convinced that the economy was entering a recession. Three main indicators helped solidify this conclusion: the reduction of the deficit, the decrease in inflation by around 20%, and the collapse of private credit. According to the Minister of Economy, Luis Caputo, prices had even fallen in nominal terms due to the slowing demand. The shock plan on consumption, activity, and investment earlier in the year seemed to have a significant impact which eventually led to the recession.

The impact of inflation was a key concern as prices jumped dramatically, higher than anticipated. Furthermore, the Central Bank revealed a significant drop in peso loans to the private sector as a result of inflation and negative rates. The looming recession became more apparent with the decline in construction and automotive production, resulting in suspensions and layoffs in various industries. Additionally, investment experienced a significant decline, reflecting the resounding drop in imported capital goods due to an exchange rate jump.

Looking ahead, the government is predicting a 3% contraction in the economy and an increase in unemployment of almost 3 points to 7.8% in 2024. The uncertainty surrounding these projections has led to skepticism about whether the current course of action will effectively lower inflation. There are concerns that if the government fails to accumulate dollars and reduce the deficit, another devaluation could occur, further accelerating prices. This possibility creates more uncertainty about the economic outlook.

By Editor

Leave a Reply