Argentina: Trade deficit narrows in March
April 25, 2018
Exports jumped from a revised 9.8% year-on-year increase in February (previously reported: +10.1% year-on-year) to a strong 17.2% expansion in March. The jump was driven by a double-digit increase in three of the four categories of the index. In annual terms, exports of primary products expanded 29.8%, while export of fuels and energy surged 58.1%.
Growth in imports slowed substantially from 26.3% in February to 8.8% in March. The increase was driven by a 31.6% expansion in fuel and lubricants and a 14.3% increase in intermediate goods mostly used for industrial production in the country.
As exports expanded at a sharper pace than imports, the trade deficit narrowed from USD 914 million in February to USD 611 million in March (March 2017: USD 910 million deficit). March’s print marked the first trade deficit reduction in 11 months. The 12-month moving average of the trade deficit came in at USD 9.78 billion, slightly below February’s USD 10.08 billion deficit (March 2017: USD 1.28 billion surplus).
The gaping trade deficit remains a major source of concern because it will contribute to a higher current account deficit, at a moment when the government is regularly tapping into international bond markets to keep up with elevated public spending. Whereas current borrowing levels are considered to be on a sustainable level, this could change quickly as the U.S. Federal Reserve continues to tighten monetary policy and inflation fails to slow. Such a scenario would force the government to keep borrowing from international sources to keep up with elevated public spending obligations.
Argentina Trade Balance Forecast
Panelists participating in the LatinFocus Consensus Forecast expect exports to grow 5.9% in 2018 and imports to increase 8.9%, pushing the trade balance to a USD 1.8 billion deficit. For 2019, the panel expects exports to increase 6.6% and imports to expand 7.7%, with a trade shortfall of USD 2.8 billion.