Itaú BBA - ARGENTINA – Short-lived GDP recovery in 3Q19

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ARGENTINA – Short-lived GDP recovery in 3Q19

Dezembro 17, 2019

We forecast a GDP contraction of 2.9% for this year.

Argentina’s GDP grew in 3Q19 relative to the previous quarter. GDP increased by 0.9% qoq/sa in 3Q19, offsetting the contraction in the previous two quarters (-0.7% and -0.1% in 2Q19 and 1Q19 respectively). On a year-over-year basis, GDP fell 1.7%, slightly below the market expectations of -1.8%, according to the Bloomberg survey. Accordingly, GDP contracted 2.5% yoy in the first three quarters of this year. The statistical carryover for 2019 is also -2.5%. 

Domestic demand continued to decline in 3Q19 due to the ongoing adjustments of fiscal and external imbalances. Domestic demand (excluding inventories) fell by 5.4% yoy (+0.2% qoq). Gross fixed investment dropped by 10.2% yoy, while private consumption contracted by 4.9% in the quarter. Public consumption declined by 0.9%. Imports plummeted by 13.4% yoy, while exports increased by 14.2% yoy due to the recovery of the soy harvest. On a sequential basis, public consumption slipped a tad (-0.1% qoq), while private consumption gained 0.3% in the same period. Fixed investment remained flat relative to the previous quarter. External demand contributed positively thanks to the expansion of exports (2.2% qoq/sa) and despite the increase in imports (1.3%).

Agricultural output was the sector driving the economy in 3Q19. Agriculture and Livestock output expanded by 12.2% yoy, reflecting a sharp recovery from the 2018 drought. The Hotel & Restaurant sector and Transportation & Communication showed gains of 1.6% and 0.2%, respectively. Most of the remaining sectors continued to contract, albeit at a slower pace. Commercial activity fell by 5.5% yoy, followed by a 4.7% decline in manufacturing. Construction dropped by 4.8%, while Financial Intermediation and Electricity, Gas & Water posted respective declines of 14.2% and 2.4%. 

We forecast a GDP contraction of 2.9% for this year. Activity endured a further deterioration following the presidential election in October, with the implementation of tighter capital controls and on-going uncertainty over debt restructuring and policy direction. 

Juan Carlos Barboza
Diego Ciongo

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