In 2020, the BCRA provided 7.3% of GDP to the government. At that time, some economists warned that issuing huge currencies in the short term would be risky, and prices would sooner or later rise. However, between the collapse of economic activity and the growing demand for preventive funds, the impact decreased in the short term, and inflation was only 36.1%.
In 2021, the situation was different. The government continues to raise funds from the Treasury through issuance, which in this case corresponds to 4.6% of GDP, and the recovery of economic activity and the decrease in demand for funds played an important role. The inflation rate was closed by more than 50%. The problem is not only in the numbers, the relative price adjustment has been postponed until this year due to the economic populism adopted by the government last year to raise the score in the legislative elections. That is, by 2022, we will not only adjust for inflation this year in gasoline, tariffs, developed countries, telecommunications, etc., but we will also do things that the government did not want last year.
That is why the monthly inflation rate is 4.7%, which seems to be lower compared to March due to the increase in the number of schools and the regulated price adjustment (as we said in the previous paragraph), so this year's forecast is that inflation will be 50% It will be close to 60% instead.
To implement a serious anti-inflation plan, it is necessary to reduce the reliance of the Treasury on the BCRA. Without this independence, any plan would be unreliable. This is what the former government had to learn when Frederick Stursinger's BCRA raised interest rates and strengthened monetary policy. On the other hand, the budget deficit not only decreased, but also added mistakes that were obvious among economists at that time.
Well, how can this government fill a fiscal loophole of about 3.5% of GDP? Of course, the measures to be taken were not welcome. Several members of the government, especially those of the vice president, knew this, and the vote on the parliamentary agreement began to reflect laughter.
Despite what Martin Guzmán said in the IMF agreement, Argentina will not return to the path of sustained economic growth. The reason is simple. Today, the rules of the game stipulate that there are no rules. One day, a withholding tax of 31% occurred, and the next day the withholding tax was raised by 2% due to the temporary suspension of export registration. One day, the government imposed price control on the products it sells, and announced that all the products it sells were lost. As a result, no country will be able to create jobs, regardless of whether they have met the Fund's goals or not. In this regard, the agreement with the IMF was a necessary but not sufficient condition for Argentina to solve the problem.
Without structural reforms, the rules of the game will not change and Argentina will continue on the path of a permanent economic crisis. The war verdict stated by the president is more like a smell than a serious plan to tighten price control and new regulations. Again, today's bread, tomorrow I'm hungry.