An economist, Mara Pedrazzoli, suggests that rising inflation in Argentina could hinder the government's ability to meet its fiscal targets. This is due to the indexation of retirement benefits to inflation.
The new agreement with the International Monetary Fund (IMF) stipulates that 80% of the loan will be disbursed in cash upfront. The government has discretionary use of these funds, which Pedrazzoli views positively from a fund management perspective.
However, she cautions that Argentina's economic fragility is evident in increasing distrust and dollarization of the market. The government is acting cautiously to avoid negative impacts on expectations, intervening in the market through Banco Nación rather than the Central Bank.
Pedrazzoli highlights the importance of monitoring agricultural exports and inflation. A resurgence of inflation could reignite exchange rate instability. She also notes the risk to fiscal goals if inflation increases, impacting indexed retirement benefits and complicating the achievement of a primary surplus.
Looking ahead, Pedrazzoli expresses concerns about the government's performance in production, investment, and employment. She points to a lack of support for industry and agriculture, challenges for small and medium-sized enterprises (SMEs), low real wages, and a paralyzed construction sector.
Regarding exchange rate policy, she warns against a return to currency appreciation, which could harm domestic industry by incentivizing imports over local production.