Argentina's Economic Outlook 2°Q 2011

Informes Trimestrales


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Argentina's Economic Outlook 2°Q 2011

Segundo trimestre

The economy has remained relatively stable and we do not anticipate major changes between now and the October elections. Economic conditions are deteriorating slightly, but at a very slow pace.

-There is some evidence that growth is decelerating, and that retail sales are growing at a lower rate. At the same time car sales are setting new highs, while consumer confidence has returned to the high levels observed in 2007.

-Industrial production has marginally reduced the rate of growth to 5% relative to year ago (according to non-official figures), while agricultural production has stabilized and construction is growing again. 

-The exchange rate has depreciated by 4.5% so far this year and amid a context of reduced banks’ liquidity (loans are growing faster than deposits) interest rates have increased by 100/150 basis points

-The exchange rate has been very stable since the 2009 elections. Between October 2009 and July of this year the dollar went from $ 3.83 AR to AR $ 4.13, implying an annualized depreciation rate of 4.4%. But in the first semester of this year the currency has depreciated by 4.2%

-In the first semester, net foreign asset purchases, basically, foreign exchange purchases by the private sector –financial and non-financial–, a proxy for “capital outflows”, rose to US$9.8 billion, far above expectations

-One problem facing the Central Bank is that individuals no longer want to keep so many pesos unless interest rates offset the risk of devaluation. This puts rising pressure on interest rates