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Itaú Says Macro Fragility Persists With Elections On The Horizon

  • WithMinister of Economy Sergio Massa running for the ruling coalition, and a competitive scenario in the main opposition coalition, Itaú believe the presidential race has become potentially tighter.
  • The economy remains fragile, and the risks of a sharp and disorderly depreciation persist. With elections looming and a heavy payment schedule in the near term, an agreement with the IMF appears likely. That said, Itaú do not expect frontloaded disbursements. Therefore, tight import and capital controls will likely continue amid record high negative net international reserves.
  • Better-than-expected activity in 1Q23 has led Itaú to expect a smaller contraction this year of 3% (previously -4%). In a context of high volatility, they cut their year-end inflation forecast to 160%, from 175%. Itaú continue to expect a meaningful official real exchange rate depreciation by the end of this year.

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