The ongoing trade war raises significant concerns regarding its potential impact on the growth trajectory of Argentina’s GDP for the current year. Analysts are in consensus regarding the trade war initiated by Donald Trump’s significant tariff impositions. While it may not have an immediate direct impact on Argentina—an assessment that may be considered hasty—it certainly has the potential to complicate the nation’s economic recovery efforts. The increase in tariffs is expected to result in a decrease in export revenues, which may impact the nation’s growth potential. However, it is unlikely that this situation will be significant enough to trigger a recession once more. Decreased currency flow and heightened strain on reserves: the trade war intensifies challenges on the external front. In an electoral year, Javier Milei stands to benefit from the ability to showcase Gross Domestic Product (GDP) growth rates that align closely with those projected by the government since last year, thanks to a favorable drag effect of 5%.
Economist Jorge Colina, who leads the Argentine Institute for Social Development (IDESA), expresses skepticism regarding Javier Milei’s ability to meet the projected 5% growth target for this year. The ongoing trade war aims to decrease international trade by lowering export prices on a global scale. Hill explained to Scope that this clearly postpones the recovery. A recent report from economists indicates that the current global environment is not conducive to facilitating recovery efforts. “He explained that a general decline in international commodity prices indicates a recession, specifically a global recession.” In light of the current challenging international landscape, Colina expressed that there will undoubtedly be increased uncertainties. He emphasized that the reduced availability of dollars in the future will pose a significant constraint on growth.
Lorenzo Sigaut Gravina, chief economist at the Equilibra consultancy, indicated that activity may not be the variable most susceptible to impact this year. “The plans were indeed of a particular nature when the government opted to reduce the ‘crawling’ to 1%. This decision came amidst an international context that had already started to unfold shortly after Trump’s victory, leading to a shift in strategy,” he elaborated. In the current volatile environment, maintaining a rigid exchange rate policy, characterized by monthly micro devaluations of 1% of the official exchange rate, significantly undermines the previously established roadmap for 2025, effectively dismantling the strategic vision that was in place. Sigaut Gravina highlights that the long-term instability and decline in raw material prices significantly affect dollar availability, thereby imposing a ceiling on activity levels.
“In this context, it is also posited that 5% of arrivals can be attributed to a statistical drag, which has positioned 2024 at a notably high level during the initial three months of the year, where activity levels were robust,” he stated. Analysts project that activity is expected to expand by approximately 6% to 7% in the first quarter. The growth rate stands at 5%, although it is important to note that 3% of this figure is attributed to drag, indicating a marginal increase. “The seasonal variation is evident,” noted the analyst, highlighting that activity is expected to slow down and potentially stagnate.
Portfolio Personal Investments (PPI) has issued a warning regarding Argentina’s position as a traditional exporter of agricultural commodities and a new player in hydrocarbon exports, indicating that the country is likely to face significant challenges due to this external shock. The price movements of soybeans are of critical importance, given that this commodity represents the primary export complex, accounting for 24.6% of exports in 2024. Additionally, the fluctuations in crude oil prices could significantly impact potential revenue from Dead Cow, according to PPI’s analysis.
In a recent statement, Martín Kalos from Epyca indicated that the GDP growth for this year is likely to align more closely with the government’s projected 5%. He emphasized that this alignment is primarily due to a “drag effect,” suggesting that only a significant catastrophe could prevent this outcome from being realized. “The availability of cloth for cutting remains uncertain.” “We must assess the current global landscape, examine the reconfiguration of tariffs, and consider whether Argentina can capitalize on these changes,” stated the economist. He emphasized the need to adopt “more conservative scenarios” moving forward, predicting that “the drag effect will be minimal by 2026.”