In recent weeks, the government has taken note of various economic indicators that have led them to believe that a recession is imminent. The three main factors that solidified this conclusion were the reduction in the deficit, the decrease in inflation by approximately 20%, and the collapse of private credit. According to Minister of Economy Luis Caputo, prices had even fallen in nominal terms due to the slowing demand.
The impact of inflation was a major concern as prices rose dramatically, higher than expected. To combat this, the Central Bank revealed a significant drop in peso loans to the private sector due to inflation and negative rates. As a result, construction and automotive production experienced declines, resulting in suspensions and layoffs in various industries. Additionally, investment suffered a significant decline due to an exchange rate jump, which caused imported capital goods to become scarce.
Looking ahead, the government is predicting that the economy will contract by 3% in 2024 and that unemployment will increase by almost 3 points to 7.8%. However, uncertainty surrounding these projections has caused skepticism about whether current policies will effectively lower inflation. There are concerns that if the government does not accumulate dollars and reduce the deficit, another devaluation could occur further accelerating prices. This possibility creates more uncertainty about