Itaú BBA - Evening Edition – Activity declines sharply in Argentina, reflecting the beginning of the lockdown

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Evening Edition – Activity declines sharply in Argentina, reflecting the beginning of the lockdown

Maio 20, 2020

As a result, we forecast a GDP contraction of 8.3% for 2020

Talk of the Day
 

Argentina

Economic activity fell sharply in March, affected by the COVID-19 outbreak and the subsequent lockdown. The EMAE (official monthly GDP proxy) fell by 11.5% yoy, worse than both the market consensus (-9.0%) and our call (-7.9%). The construction downturn deepened to -27% yoy in 1Q20 from -8.3% yoy in 4Q19. Manufacturing fell by 6.5% in the same period (vs. -2.1% in 4Q19). Meanwhile, services contracted by 5.5% yoy in 1Q20 (vs. -0.8% in the previous quarter). Finally, Agriculture, Mining and Fishing activity retreated by 5.0% yoy after growing by 0.6% in 4Q19. Coincident indicators are pointing to an even sharper contraction in 2Q20. We expect a severe contraction due to the negative effects of the measures taken to control the outbreak of COVID-19, followed by some output normalization in the second half of the year as the lockdowns are lifted. As a result, we forecast a GDP contraction of 8.3% for 2020. ** Full story here.

Brazil

Itaú Daily Activity Index: Our Daily Activity Index has increased 0.6 p.p. in the last available day (Monday, May 18th), to 69.8, while the 7-day moving average dropped 0.4p.p., to 74.2. The index is down 30% when comparing the latest data available with the first half of March. See our report here.

Tomorrow’s Agenda: FGV business confidence survey on the industrial sector (second preview) for May will be released at 8:00 AM (SP time).

Peru

Tomorrow’s Agenda: The statistics institute (INEI) will announce GDP growth for 1Q20, which we estimate at -3.5% yoy. We expect the demand-side breakdown of GDP to show a broad-based deterioration, associated to distancing measures implemented since March to contain the outbreak.

Paraguay

Tomorrow’s Agenda: The Central Bank will announce the decision of its monetary policy meeting. The authorities have cut the reference rate by a cumulative 275 bps between March and April, to 1.25%, to boost credit and mitigate the impact of the lockdown on the economy. In its latest meeting, the BCP cited the low inflation environment and the weak internal demand to justify the size of the rate cut. We expect the BCP to keep its policy rate at 1.25%.



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