Slower rate of devaluation to repress inflation

ARGENTINA - Forecast 04 Mar 2021 by Domingo Cavallo

The recovery of the economy since May 2020, after the sharp decline of the previous four months, was faster than previously forecast. In November we had forecast a decline of 12%, similar to the decline estimated by the government in the presentation of the 2020 Budget to Congress. In 2020, the actual decline of GDP was 10%.

The faster recovery was explained by the softening of the effects of the pandemic and by higher export prices. Both factors continue to hold. Now that the vaccination against Covid-19 has started, the expectations of improved health conditions have been reinforced . This notwithstanding, we continue to forecast GDP growth in 2021 at 4.1%, the same as we forecast in November. This is so because the announcements and tone of the presidential speech at the inauguration of the Ordinary Sessions of Congress will very likely discourage private investment, offsetting the gains from the other factors.

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