Investment in Argentina
Argentina - Investment
Economic contraction softens in Q3
According to the Statistical Institute (Instituto Nacional de Estadísticas y Censos, INDEC), economic activity in the third quarter contracted 3.5% in year-on-year terms on the back of plunging domestic demand. However, this was a softer drop than the 4.0% fall recorded in the second quarter. On a quarter-on-quarter basis, the economy shrank 0.7% in Q3, following the 4.1% plunge observed in Q2, which had marked the most severe contraction in nearly a decade.
The fall in Q3 reflected weakness in the domestic economy. Domestic demand fell 5.0% following Q2’s 1.5% drop, while private consumption swung from Q2’s 0.6% expansion to a notable 4.5% contraction in Q3. Consumer spending was hit by a significant depreciation of the peso and continued subsidy cuts in public utilities, which translated into soaring inflation and ate into consumers’ purchasing power, dragging down consumer confidence. Moreover, fixed investment plummeted 11.2% in the third quarter, strongly contrasting the 2.9% increase recorded in the previous quarter, owing to a sharp contraction in machinery and transport equipment. Meanwhile, government consumption contracted 5.0% in the third quarter, a sharper fall than Q2’s 2.6% decrease. The decline again reflected the government’s intensifying efforts to rein in fiscal spending and reduce the fiscal deficit.
The external sector’s performance, meanwhile, improved in the third quarter, although this was only due to imports contracting at a faster pace than exports. Imports swung from a 3.1% increase in Q2 to a notable 10.2% drop in Q3, reflecting shrinking private consumption and plunging demand for investment goods, as the contraction in exports moderated from 8.5% in Q2 to 5.9% in Q3, thanks to improved agricultural production in the quarter.
The economy will likely remain stuck in recession next year, although the contraction should soften. Strong, albeit moderating, inflationary pressures and rising taxes will eat into consumers’ purchasing power, while high interest rates and shrinking public investment will weigh on fixed investment. That said, the trade balance is set to swing from deficit to surplus, thanks to higher agricultural exports and lower imports, while the fiscal deficit ought to narrow. Downside risks stem from possible capital flight following the Fed’s tightening cycle and the uncertain political outcome in next October’s elections. LatinFocus Consensus Forecast analysts see the economy contracting 0.9% in 2019, down 0.4 percentage points from last month’s estimate, before rebounding to 2.7% growth in 2020.
Argentina GDP Forecast
Argentina - Investment Data
|Investment (annual variation in %)||2.3||-6.8||3.5||-4.9||11.3|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||6.69||0.15 %||Dec 17|
|Exchange Rate||38.21||0.45 %||Feb 14|
|Stock Market||37,386||2.26 %||Feb 14|
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February 15, 2019
According to the National Statistical Institute (INDEC), national consumer prices rose 2.9% over the previous month in January, coming in above December’s 2.6% month-on-month increase.
February 6, 2019
Industrial production plunged a multi-year low of 14.7% over the same month of last year in December, according to data released by the National Statistical Institute (INDEC) on 5 February, marking a steeper fall than November’s 13.9% year-on-year decline. December’s result reflected contractions in all components of the index.
January 25, 2019
The Universidad Torcuato di Tella (UTDT) consumer confidence index dropped to 33.1 points in January from 36.0 points in December—which had marked the best reading in four months.
January 25, 2019
The monthly indicator for economic activity (EMAE, Estimador Mensual de Actividad Económica) contracted 7.5% in annual terms in November, a sharper drop than the revised 4.2% fall recorded in October (previously reported: -4.0% year-on-year).
January 23, 2019
Exports leaped 15.4% in year-on-year terms in December, following November’s 14.6% increase.