Domestic Demand in Argentina
Argentina - Domestic Demand
Economy falls back into contraction in Q3 on sinking domestic demand
Economic activity in the third quarter slumped 1.7% year-on-year, following the flat result recorded in Q2, according to the Statistical Institute (INDEC). Another sizable contraction in domestic demand and somewhat softer support from the external sector were behind the gloomy performance. On a quarter-on-quarter seasonally-adjusted basis, the economy rebounded 0.9% in Q3, contrasting the 0.7% drop observed in Q2.
The third quarter’s downturn reflected another sharp contraction in the domestic economy. Sky-high interest rates, August’s peso selloff and runaway inflation weighted on activity. Domestic demand sank 7.9% in annual terms, following Q2’s 8.4% dive, with private consumption shrinking 4.9% in Q3 (Q2: -8.2% year-on-year) amid rising unemployment, abysmal consumer confidence and roaring inflation. Meanwhile, fixed investment plunged 10.2% in the third quarter, although less severely than Q2’s 18.3% nosedive. A significant contraction in investment in machinery and transport equipment was again behind the fall. Meanwhile, government consumption dipped 0.9% in Q3, a softer drop than Q2’s 1.9% contraction, reflecting the government’s continued efforts to cut spending to meet fiscal targets as agreed with the IMF.
While the external continued to support growth, a somewhat smaller surge in exports and a less pronounced contraction in imports limited the contribution. Imports fell 13.4% in Q3 (Q2: -22.4% yoy), again reflecting plummeting domestic demand and a tumbling peso. Exports, meanwhile, jumped14.2% in Q3 (Q2: +15.4% yoy), boosted by rising agricultural production in the quarter.
Next year, the economy will likely remain trapped in recession. Investor concern related to the new government, coupled with sky-high inflation and interest rates, will depress investment and spending, only partly compensated by a solid external sector. The risk of a disorderly debt write-off and unsustainable policies further cloud the outlook.
LatinFocus Consensus sees the economy contracting 1.8% in 2020, which is down 0.2 percentage points from last month’s estimate, before rebounding 1.8% in 2021.
Argentina - Domestic Demand Data
|Domestic Demand (annual variation in %)||4.0||-3.9||4.2||-1.6||6.0|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||6.69||0.15 %||Dec 17|
|Exchange Rate||59.88||0.45 %||Dec 30|
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January 16, 2020
On 21 December, Congress approved an emergency economic reform package delivered by the new Peronist government led by Alberto Fernández.
Argentina: Central Bank lowers interest rate floor at January meeting, raising the spectre of a rapid monetary expansion
January 15, 2020
On 9 January, in a bid to stimulate the economy, the Central Bank of Argentina (BCRA) decided to reduce the lower floor for the LELIQ rate to 52.0% from 55.0%, a move which could prompt a further rapid expansion of liquidity.
January 15, 2020
Consumer prices rose 3.7% over the previous month in December, coming in below November’s 4.3% rise and market expectations of a 4.3% increase, according to the National Statistical Institute (INDEC).
January 8, 2020
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January 2, 2020
The Universidad Torcuato di Tella (UTDT) consumer confidence index edged up to 42.3 in December from 41.4 in November.