2027 Budget: Economists See "Reasonable" Inflation, but Doubt 4% GDP Growth

The Minister of Economy, Luis Caputo, presented on Tuesday for the first time the macroeconomic projections that will be included in the 2027 Budget Bill. Starting from the premise that all budgets tend to be optimistic, most economists agreed that the inflation estimate is not utopian, but they see the 4% growth perspective for Gross Domestic Product (GDP) as very ambitious.

In the context of a meeting with members of the Government's Political Table, the official outlined the main indicators considered for the last year of his term. In terms of inflation, the forecast is 18%, just below the 20% calculated by participants in the latest Market Expectations Survey (REM) conducted by the Central Bank (BCRA).

In dialogue with Ámbito, economist Federico Glustein considered it to be "a relatively coherent inflation if we think of a sustained decrease in the coming months, which remains above 1%."

In the same vein, Diego Piccardo, chief economist at the Liberty and Progress Foundation, does not see it as an outrageous scenario, considering that "in August inflation was 1.7% and it is possible that values lower than this will be recorded before the end of the year." "Our projection is slightly above the official one, around 21% annually," he elaborated.

For his part, Claudio Caprarulo, director of Analytica, detailed that the Executive's projection "would give an average monthly inflation of 1.4%," which he considers to be "optimistic, but reasonable."

Regarding the exchange rate, the Government anticipates a dollar at $1,847.6 by the end of its term, which would represent a 15.5% increase, deepening the exchange appreciation. The Liberty Foundation has a similar expectation and maintains that the projected level is achievable. "Although the elections could generate episodes of exchange rate volatility, the Government has been strengthening its response capacity. The accumulation of reserves continues in a period of lower seasonal supply of foreign currency than the second quarter, while the reduction of the short position in futures expands the margin for intervention heading into next year," Piccardo elaborated.

In this regard, Glustein speculated that we will probably see an exchange rate "lower until the elections and somewhat liberated post-elections, more in line with a less appreciated exchange rate and better positioned for the demands of the local market, which today places it up to 14% behind."

In turn, Nicolás Bertholet, economist at Paramétrica, stated to this medium that the Government "needs a higher dollar so that it does not continue to appreciate, but that also runs the risk of accelerating inflation, all in the midst of an election year."

The market doubts that the economy can grow by 4%, as the Government claims

So far, Caputo's presentation does not seem to be selling colored beads. However, when looking at the projections for economic activity, skepticism emerges.

For the minister, GDP will grow by 4% next year, a number that far exceeds the 2.9% expected by consulting firms, research centers, and financial entities participating in the REM. It also seems unlikely that the economy will end 2026 with a 3% expansion, as the government claims, when market forecasts are closer to 2%.

Unlike what has been happening until now, Casa Rosada asserts that investment will be a key driver of economic growth, with an annual jump of 9.2%. In conversations with this media outlet, Caprarulo wondered what could drive this advance in a year of uncertainty due to elections and with an exchange rate appreciation that erodes companies' costs.

"What makes the most noise for me is how they will achieve the economic growth rate. Among other things, because they also indicate a slight recovery in private consumption, when what we are seeing is that the labor market continues to worsen. We should consider whether the mere decrease in inflation is enough for real wages and consumption to grow," added the economist.

Glustein also doubts that the estimates related to GDP will be met. Specifically, regarding the investment target, he said that, given the current floor and the contribution of projects from the Large Investment Incentive Regime (RIGI), "a high growth can be glimpsed, but 9% seems an ambitious target if we think that the growth for 2026 is diminishing and that there is no change in the model that allows for such strong accumulation from abroad.**

In this regard, Piccardo also agreed. "A 4% GDP expansion looks optimistic for an election year, in which uncertainty could condition consumption and investment decisions. Faced with doubts about the evolution of their income and purchasing power, households tend to act more cautiously, postponing expenses and, when they have room, increasing precautionary savings. Similarly, companies may delay investment projects until they have greater clarity about the continuity of the economic direction. For these reasons, we project a growth close to 2.5%,” he emphasized, although he also clarified that if uncertainty decreases, the economy could find space to approach the Government's target.

Trade Surplus of $15,000 Million: Is it a Feasible Estimate?

Finally, Caputo projected a trade surplus, including goods and services, of $15,560 million. This would result from a 9.5% increase in imports, up to $118,424 million, and a 7.3% rise in exports, to $133,984 million.

Federico Bernini, a researcher at the University of Buenos Aires and specialist in foreign trade, told Ámbito that the forecast for exports can be "easily achieved." "I would even say it is not very ambitious (perhaps they are expecting decreases in international prices, which I would find reasonable).**

Regarding imports, he expressed that it is an expectation in line with the expected increase in GDP, although this last point was precisely what was questioned. "Public works would have to grow significantly in an election year," he concluded.

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