Itaú BBA - ARGENTINA – Further deceleration of activity at the end of 2019

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ARGENTINA – Further deceleration of activity at the end of 2019

Janeiro 23, 2020

Activity contracted by 2.3% yoy during the first 11 months of the year

Higher-than-expected drop in November relative to the same month of 2018. The EMAE (official monthly GDP proxy) decreased by 1.9% yoy, missing both our expectation and the Bloomberg consensus of a 0.8% decline. On sequential basis, the EMAE fell 1.7% mom/sa in November, after a temporary rebound in the previous month (+2.0% mom/sa). Activity dropped 3.0% qoq/saar, down from a gain of 3.7% in 3Q19. Activity contracted by 2.3% yoy during the first 11 months of the year.

Primary activities decelerated (but continued to grow), while the rest of the sectors posted declines relative to 2018. The Agriculture, Mining and Fishing sectors expanded by 1.4% yoy in the quarter ended in November (from 6.9% in 3Q19), as the positive effects of the normalization following the drought dissipate. The remaining sectors continued to contract. Construction activity dropped by 7.5% yoy in the quarter ended in November (from -4.8% in 3Q19), Manufacturing fell by 4.0% (from -4.7% in 3Q19) and Services contracted by 1.4% yoy (from -2.2% in 3Q19), on lower real wages following the acceleration of inflation.

Most sectors decelerated on sequential basis in 4Q19. According to our seasonal adjustment, primary activities fell 14.1% qoq/saar in November, from a gain of 0.3% in 3Q19. Manufacturing output decreased 9.9% qoq/saar in November (-4.3% in September). The Construction sector posted a decline of 16.1% qoq/saar, following an 8.6% decrease in the quarter ended in September. Finally, the Service sector fell by 1.6%, after sliding 1.9% qoq/saar in 3Q19.

Recession set to continue in 2020. We forecast a 2% decline in GDP this year, following a 2.9% contraction in 2019. Some improvement in real wages and the high dollarization of savings can lead to consumption rebound, but they are unlikely to offset the effects of uncertainty and controls on investment. Furthermore, a lack of external financing also stands in the way of an internal demand recovery.
 

Juan Carlos Barboza
Diego Ciongo

 



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