20181010-法国巴黎银行-ARGENTINA_–_CONSTRAINED_GROWTH_OUTLOOK_7页_496kb

Argentina: Constrained Growth Outlook

Core Content Summary

This report provides an economic outlook for Argentina, focusing on the impact of recent monetary policy changes on the country's growth trajectory. It outlines the challenges facing the economy in 2018 and 2019, emphasizing the effects of tight liquidity conditions, high inflation, and political uncertainty.

Key Messages

• Monetary Policy Impact: Recent changes to the monetary policy framework are expected to further constrain Argentina's growth outlook. The central bank's commitment to keeping the monetary base unchanged in nominal terms is likely to keep interest rates high.
• GDP Forecasts: The real GDP forecast for 2018 has been revised downward to -2.5% from -1.5%, and for 2019 to -1.5% from 0.5%. A stabilization and tentative recovery are expected in 2019, but strong negative statistical carryover is likely to offset this, leading to another contraction.
• Inflation and Consumption: High inflation, expected to reach 44% y/y in December 2018 (up from 37% previously), will likely depress consumption in the short term. Inflation is expected to moderate to 26% y/y in 2019.
• Credit Contraction: The credit channel, which was a significant driver of growth in 2017, is unlikely to support growth this year. Credit to the private sector has contracted by an average of 1.8% real monthly since April 2018.
• Investment Constraints: High borrowing costs and political uncertainty, particularly around the 2019 presidential election, are expected to hurt investment. Capital imports have already shown underperformance in recent months.
• Agricultural Recovery: A sharp 30% y/y rebound in agricultural output is expected in 2019, which could add 2.7% to growth. Harvesting is expected to occur in Q2 2019.
• Currency and Trade Impact: The ARS has weakened significantly against the USD and in multilateral terms, which may lead to improved performance in tradable sectors.
• Interest Rate Outlook: The Leliq rate is forecasted to moderate to 30% by the end of 2019, though rates are expected to remain elevated for longer due to the new monetary regime.

Economic Outlook

2018

• Real GDP growth is expected to contract by -2.5%.
• The economy is likely to continue contracting in Q3 and Q4.
• High inflation and tight liquidity conditions are expected to dampen consumption and investment.

2019

• Real GDP growth is forecasted to contract by -1.5%, despite a potential stabilization and tentative recovery.
• Agricultural output is expected to rebound sharply, contributing positively to growth.
• Inflation is expected to moderate to 26% y/y, but the credit channel and political uncertainty will continue to hinder economic activity.

Key Factors Affecting Growth

• Monetary Policy: The central bank's policy of keeping the monetary base unchanged in nominal terms is leading to higher interest rates and tighter financial conditions.
• Inflation: Persistent high inflation is expected to reduce consumer spending and create uncertainty in the market.
• Credit Availability: Credit to the private sector has contracted significantly, limiting growth potential.
• Political Uncertainty: The upcoming 2019 presidential election adds to the uncertainty surrounding investment and policy direction.
• Agricultural Sector: Expected to provide a positive boost to growth in 2019 due to a significant output rebound.
• Currency Weakness: The depreciation of the ARS may have a mixed impact, potentially benefiting tradable sectors but harming overall economic stability.

Conclusion

Argentina faces a challenging growth outlook in 2018 and 2019 due to a combination of monetary policy constraints, high inflation, and political uncertainty. While there are signs of potential recovery in the agricultural sector, the overall economic contraction is expected to persist. The central bank's new monetary regime is likely to maintain tight liquidity conditions and high interest rates, further dampening economic activity.