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ARGENTINA – Stronger-than-expected trade surplus in March

abril 24, 2019

Weak activity and currency lead to a rapid adjustment.

Argentina’s trade balance showed a significant surplus in March. The trade surplus reached USD 1.2 billion, compared with a deficit of USD 0.5 billion in the same month of 2018. The surplus was significantly above the market consensus (Bloomberg survey) and our forecast, both at USD 0.5 billion. The 12-month trade balance entered positive territory with a surplus of USD 0.6 billion, from a deficit of USD 1.2 billion in February. At the margin, the three-month cumulative and annualized surplus was USD 9.7 billion, up from USD 9.4 billion in the quarter ended in February.

The decline in imports deepened in March, both on year-over-year basis and on a sequential basis. The 33.7% yoy decline in total imports was significant across all sectors. Imports fell by 11.2% mom/sa, ending the streak of three consecutive increases and suggesting that there are still risks for activity stabilization. Weak investments led to lower imports of capital goods and parts, which fell by 41.2% yoy. Consumer goods imports (including cars) fell by 42.7%, while imports of intermediate goods dropped by 21.3%.

The decline in exports was also widespread, but led by non-agricultural products. Total exports decreased by 5.0% yoy in March (+0.7% mom/sa). Industrial product sales dropped by 6.5%, while Agricultural exports (including manufactured agricultural products) fell by 5.5% yoy, mostly due to reduced sales of soybeans. We expect agricultural exports to pick up in April and May with the expected normalization of soy output after the severe drought of last year.

Energy balance continued to improve in March, due to lower imports. The accumulated 12-month deficit fell to USD 2.2 billion in March, from USD 2.3 billion in February.

Rapid adjustment of external accounts was led by weak currency and reduced internal demand. We forecast a trade surplus of USD 5.5 billion for 2019 (from a USD 3.8 deficit last year) and a major narrowing of the current account deficit, to 1.2% of GDP (down from 5.4% in 2018).

Juan Carlos Barboza
Diego Ciongo



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