Itaú BBA - ARGENTINA – Current account deficit narrowed significantly in 3Q19

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ARGENTINA – Current account deficit narrowed significantly in 3Q19

Dezembro 20, 2019

We forecast a current account deficit of 0.6% of GDP for this year

The current account balance showed a sharp adjustment in 3Q19. The deficit narrowed to USD 1.1 billion, from a deficit of USD 7.4 billion in the same quarter of 2018, beating both our (-USD 1.3 billion) and market expectations according to Bloomberg (-USD 2.0 billion). The deficits for the previous two quarters were revised downward. As a result, the four-quarter rolling deficit declined to USD 8.4 billion (1.8% of GDP), from USD 14.8 billion in 2Q19 (3.2% of GDP) and USD 27.3 billion in 2018 (5.1% of GDP). At the margin, we estimate that the seasonally-adjusted current account deficit in 3Q19 narrowed to 1.2% of GDP, from 2% in 2Q19.

Trade balance for goods showed a surplus in 3Q19, as the harvest continued to normalize and imports declined. The trade balance for goods improved to a surplus of USD 4.5 billion, from a deficit of USD 0.7 billion in the same quarter of 2018. The deficit in the service account decreased to USD 1.5 billion (from USD 2.0 billion), driven by a continued reduction of the deficit in the tourism account. The income balance (net interest bill and dividend payments) showed a deficit of USD 4.3 billion, down from USD 4.9 billion in 3Q18.

The use of international reserves and the IMF disbursement for July financed the current account deficit, the amortization of treasury obligations and a significant portfolio dollarization. The government received USD 5.4 billion from the IMF and paid treasury obligations (a repo agreement with international banks). Purchases of USD for hoarding and transfers to offshore accounts totaled USD 17.0 billion in 3Q19. As a result, international reserves dropped by USD 14.8 billion. External debt totaled USD 276.7 billion at the end of September 2019 (60.3% of GDP), mostly public debt.

We forecast a current account deficit of 0.6% of GDP for this year, due to a USD 14.5 billion trade surplus and a further narrowing of the service deficit, mostly tourism.

Juan Carlos Barboza
Diego Ciongo

 



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