Itaú BBA - ARGENTINA – Current account turned into surplus in 4Q19

Macro Latam

< Voltar

ARGENTINA – Current account turned into surplus in 4Q19

Março 26, 2020

At the margin, we estimate that the s.a. current account surplus reached 2.3% of GDP in 4Q19.

The current account posted a surplus of USD 3.0 billion in 4Q19, from a deficit of USD 2.0 billion in the same quarter of 2018. As a result, the current account deficit for 2019 fell to USD 3.5 billion (0.8% of GDP), from USD 27.3 billion in 2018 (5.3% of GDP). At the margin, we estimate that the seasonally-adjusted current account surplus reached 2.3% of GDP in 4Q19. 

Trade balance for goods showed a significant surplus in 4Q19. Imports declined by 20% yoy due to a weaker currency and slowing internal demand, while exports increased by 7%, mostly on a good wheat harvest. The trade balance for goods consequently improved to a surplus of USD 7.0 billion in 4Q19, up from a surplus of USD 3.4 billion in the same quarter of 2018. The deficit in the service account also decreased, to USD 0.6 billion (from USD 1.1 billion), mostly due a reduction in the deficit of the tourism account. The income balance (net interest bill and dividend payments) decreased to USD 3.6 billion, from USD 4.6 in 4Q18.

The current account surplus and dwindling international reserves have financed persistent and considerable USD hoarding by the population. Uncertainties surrounding policy direction and debt restructuring following the defeat of the incumbent in the October presidential election have led Argentines to withdraw USD 8.4 billion in hard currency from domestic banks in 4Q19 (down from USD 17.3 billion in the previous quarter). Without external financing, international reserves fell by USD 4.7 billion during the last quarter of last year. Net foreign direct investment inflows (including reinvested earnings) contributed a modest USD 1.1 billion to financing, down from USD 2.3 billion in 4Q18. Finally, external debt remained unchanged at USD 278 billion in 2019, relative to the end of 2018, but increased to 62% of GDP from 54% last year, due to a weaker ARS.

We forecast a lower current account surplus of 0.2% of GDP this year, mostly due to a reduction of the trade surplus on lower soy prices.
 

Juan Carlos Barboza
Diego Ciongo



< Voltar