March 19, 2019
The economic climate indicator (ICE, Indicador de Clima Económico) published by the Statistical Institute improved from minus 16 points in the third quarter to minus 12 points in the fourth quarter. As a result, sentiment remained deeply-entrenched in negative territory at the end of 2018, although the Q4 result marked the best reading in over three years, signaling that economic recovery might be underway.
The fourth-quarter improvement was largely broad-based, with the manufacturing, construction and extractive sectors posting the strongest gains in confidence. Sentiment in the commercial, communications and tourism sectors also rose in Q4, although less markedly, while confidence in the transport sector remained at the same level as in Q3. Overall, just two out of seven surveyed sectors—communications and transport—were in positive territory in Q4, unchanged from the previous quarter. Furthermore, sentiment in all but one sector—the construction—remained below their respective long-term average levels, with confidence in the all-important commercial and manufacturing sectors still deeply entrenched in negative territory.
Looking ahead, amid the approval and immediate disbursement of a large chunk of the IMF’s USD 3.7 billion credit facility at the end of 2018, the economy is expected to emerge from recession this year. Sustained fiscal consolidation should help bring government debt to safer levels, while moderating inflation and greater exchange rate flexibility are seen bolstering domestic demand.
Author: Almanas Stanapedis, Economist