Investment in Argentina
Argentina - Investment
Economy rebounds in Q2 on surging exports, but outlook darkens with changed political landscape
Economic activity in the second quarter expanded 0.6% in year-on-year terms, contrasting the 5.8% dive recorded in Q1, according to the Statistical Institute (INDEC). A softer contraction in domestic demand and a jump in exports were behind the improved performance of the economy. On a quarter-on-quarter basis, the economy shrank 0.3% in Q2, following the revised zero growth observed in Q1 (previously reported: -0.2% quarter-on-quarter).
The second quarter’s rebound reflected a softer contraction in the domestic economy, although it nevertheless remained sizable. Stubbornly high interest rates and runaway inflation continued to weigh on activity. Domestic demand sank 7.8% in annual terms, following Q1’s 12.6% dive, with private consumption plunging 7.7% in Q2 (Q1: -9.9% year-on-year) amid rising unemployment, downbeat consumer confidence and elevated price pressures. Meanwhile, fixed investment nosedived 18.0% in the second quarter, although the result represented an improvement over Q1’s 24.5% plunge. A staggering contraction in investment in machinery and transport equipment on the back of vanishing domestic demand was behind the fall. Meanwhile, government consumption declined 1.7% in Q2, a somewhat sharper drop than Q1’s 0.5% contraction. This likely reflected the government’s efforts to cut spending to meet fiscal targets as agreed with the IMF.
A surge in exports together with another sharp contraction in imports drove the external sector’s positive performance. Imports plummeted 22.7% in Q2 (Q1: -25.1% yoy), again reflecting tumbling domestic demand and a weaker peso. Exports, meanwhile, jumped, soaring 15.0% in Q2 (Q1: +1.4% yoy), boosted by rising agricultural production in the quarter.
Argentina’s outlook has deteriorated substantially in our latest LatinFocus due to August’s financial crisis. The changed political landscape prompted LatinFocus Consensus Forecast analysts to drastically revise their expectations this year and the next. The high probability of a Peronist victory at October’s elections has clearly clouded the outlook, re-awakening fears of a potential default and harmful fiscal policies of the past.
The economy is now seen contracting 2.7% in 2019, which is down 1.4 percentage points from last month’s estimate, and falling by 1.4% in 2020.
Argentina - Investment Data
|Investment (annual variation in %)||2.3||-6.8||3.5||-5.8||12.2|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||6.69||0.15 %||Dec 17|
|Exchange Rate||56.01||0.45 %||Sep 04|
|Stock Market||24,665||2.26 %||Sep 04|
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October 16, 2019
Consumer prices surged 5.9% over the previous month in September, coming in well above August’s 4.0% and marking the second consecutive month of intensifying price pressures, according to the National Statistical Institute (INDEC).
October 8, 2019
Alberto Fernández’s Everyone’s Front coalition (Frente de Todos) is the strong favorite to win Argentina’s general elections scheduled for 27 October, increasing the likelihood of unorthodox economic policies ahead.
October 3, 2019
Industrial production fell 6.4% over the same month of last year in August, according to data released by the National Statistical Institute (INDEC) on 3 October.
September 27, 2019
The Universidad Torcuato di Tella (UTDT) consumer confidence index rose to 42.1 in September from 41.9 in August.
September 26, 2019
The monthly indicator for economic activity (EMAE, Estimador Mensual de Actividad Económica) increased 0.6% year-on-year in July, after logging a revised 0.4% uptick in June (previously reported: 0.0% year-on-year).