Although highlighting some positive aspects it is necessary to put a lot of Attention to the latest BCRD report.
The economy is falling too fast 5.4% August; 4.8% September; 3.8% October and 2.9% November. We are talking about almost a 1% monthly drop in the last 4 months and that’s called going into recession very early in 2023, if we do not reverse that deterioration.
In any case, we will close 2022 with 5% growth, which is very good and perhaps the fourth highest in LAC.
The current account deficit of the balance of payments it is expected to close at 5% of GDP, a figure that is too high despite the fact that foreign investment would reach some US$4 billion, largely offsetting it.
The problem is imports (US$23 billion as of September) for which high prices of food raw materials, gas and oil, agricultural inputs and construction materials, although we will export much more than in 2021. But the deficit in the balance of goods will be the highest in many years and that triggered the external deficit.
Year-on-year inflation (7.58 to November) will continue to fall, but it will possibly end up above 7.3% in 2022 (BCRD estimates it at 7.1%), placing it in the sixth place among the countries with the lowest inflation in LAC. But more monetary measures will be needed to bring it into the target range and that implies further rate hikes.
Employment will begin to show signs of slowing down at the beginning of the year in sectors such as construction, although the IMAM (Monthly Index of Manufacturing Activity) rose in November to 59.4 points. In October it had fallen below 50 points.
Despite a 9% increase in tax revenue, we will close the year with a deficit of 3.6% of GDP (scheduled 3%), due to the high social spending, which includes the freezing of fuel prices.
Remittances, tourism, foreign investment and exports (including free zones), will end up going from strength to strength with foreign exchange earnings of some US$39 billion.
Reserves will close over US$14 billion, representing about 6 months of imports.
It is not all good news, but I have always said that crises must be taken advantage of and ours rests on stability, transparency, legal certainty and a good business climate for foreign investment, who will be seeking refuge and security for their money in a year that many consider to be catastrophic for the world economy.