Argentine consultancies are starting to publish economic forecasts for 2025 — and there are some surprises. PxQ, the firm led by former Deputy Economy Minister Emmanuel Álvarez Agis, has assigned a higher likelihood to the optimistic scenario than to the base scenario for the first time since 2017. Analysts broadly agree that GDP will grow, inflation will decelerate, and consumption will recover. However, the exchange rate remains the biggest question mark.

Both critics and staunch libertarians agree: the tax amnesty was a game changer. The segment of the government program facing the greatest challenges in the second half of the year — critical to disinflation and the government’s positive image — was the exchange rate. The government, however, managed to build a bridge.

According to PxQ, this development allows Javier Milei to envision 2025 without external imbalances threatening inflation’s downward trajectory via a devaluation. For the first time since 2017, the consulting firm assigns a higher probability to the optimistic scenario than to the base scenario.

If the projection materializes, 2025 could become “the year of the Lion.” This characterization by one of the market’s most respected firms suggests that market optimism could enable the government to maintain the combination of growth and lower inflation.

This scenario envisions GDP growth of around 5% and inflation at 22.8%. The exchange rate would increase by 13%, with the dollar closing the year at approximately US$1,162. Private-sector wages are expected to grow by 27%, outpacing average price increases.

Economist Marina Dal Poggetto offered a unique characterization of her projections. The first scenario, titled “Keep going, it’s working,” predicts GDP growth of 4.9%, inflation around 24%, and a 6.3% expansion in private consumption.

However, she also proposes a second scenario: “Keep going, it’s not working.” In these conditions, GDP growth would be around 4.4%, private consumption recovery would hover around 3.4%, the dollar would rise to $1,700, and unemployment could climb to 9%.

According to Álvarez Agis’ consultancy, “the main tool for reactivating the economy while simultaneously lowering inflation lies in exacerbating the loss of competitiveness in the Argentine economy, as the government decisively moves forward with opening up the economy.”

A report by the firm 1816 concurs that debates about the exchange rate level will persist because “between June and November, there was a current account deficit every month.” It also points out that the dollar — whether measured by the official rate or the CCL (Contado con Liquidación) — is at levels rarely seen since the end of convertibility, which is now reflected in the balance of payments.

Offshore exposure to pesos, 1816 notes, is almost nonexistent. According to INDEC, as of September 2024, foreign investors held just US$762 million in peso-denominated portfolio investments, compared to US$25 billion in 2017. “It’s undeniable that non-residents barely hold pesos,” their report emphasizes.

The government is resolute, asserting that exchange rate stability will continue — a hypothesis that has adherents. According to Invertir en Bolsa (IEB), “the strong peso is here to stay.” IEB justifies this claim by pointing to perceived international confidence in the country, export settlements, projects driven by the RIGI large investment regime, and improvements in the energy balance.

© Buenos Aires Herald