Itaú BBA - ARGENTINA – Current account balance showed strong surplus in 2Q20

Macro Latam

< Back

ARGENTINA – Current account balance showed strong surplus in 2Q20

September 29, 2020

we see upside risks to our forecast of a current account surplus of 0.6% of GDP for this year.

The current account showed a surplus of USD 2.8 billion in 2Q20, from a deficit of USD 1.9 billion in the same quarter of 2019. The 1Q20 figure was revised upward to a surplus of USD 0.3 billion, from a deficit of USD 0.4 billion. This drove the four-quarter rolling current account balance to a surplus of USD 4.6 billion (1.1% of GDP), from a deficit of USD 4.0 billion in 2019 (-0.9% of GDP)​​. At the margin, we estimate that the seasonally-adjusted current account balance had a surplus of 2.8% of GDP in 2Q20.


 
Trade surplus for goods widened in 2Q20, relative to 2Q19. Imports fell by 28.1% yoy, in line with the hefty contraction in internal demand. Exports decreased by 14.6%, mostly due to a drop in industrial products following a steep decline in car and biodiesel sales. The trade balance for goods consequently improved to a surplus of USD 5.3 billion in 2Q20, up from a surplus of USD 4.2 billion in the same quarter of 2019. The deficit in the service account narrowed to USD 0.3 billion (from USD 1.4 billion), mostly due to a reduction in the deficit of the tourism account. The income balance (net interest bill and dividend payments) decreased to USD 2.5 billion, from USD 4.9 in 2Q19.
 
Despite the strong surplus, international reserves fell due to USD hoarding and public debt payments. The government (including the central bank) made net payments of USD 0.8 billion, while individuals – within the capital control limits – made hard currency purchases of USD 0.9 billion. Net foreign direct investment contributed USD 513 million. As a result, and without external financing for the public or private sector, international reserves fell by USD 0.8 billion during the second quarter of this year. 

Amid tighter exchange rate controls, lack of external financing and a contraction of internal demand, we see upside risks to our forecast of a current account surplus of 0.6% of GDP for this year.

Juan Carlos Barboza
Diego Ciongo

 



< Back