Argentina Macroeconomic Perspectives

Argentina: Recent FX regulations stabilized the exchange rate, however attention has turned to the outflow of US dollar deposits

• Following one week since new regulations commenced, the exchange rate appreciated 6% in the wholesale market while the spread in the informal market fell to 5%. Furthermore, daily reserves sales by the Central Bank dropped to USD 125 million on average, almost half those before the market was controlled, and the base Leliq rate stayed close to 85%.

• However, deteriorated confidence increased deposit outflows. Daily US dollar deposits withdrawals averaged USD 490 million, while the total stock fell by USD 8,329 million since Primaries, close to 25% of the total.

• So far, financial institutions´ liquidity is relatively high, at 55% of foreign currency deposits. The corollary is the cut in US dollar financing, mainly to the export sector, as banks prioritize cash liquidity in order to face deposit withdrawals.

• July´s activity figures showed a recovery of the industrial and construction (+3.3% mom s.a.) sectors. Manufacturing production rose 3% mom s.a. and reduced the annual contraction to -1.9%. However, the outlook change following Primaries, is likely to end the positive trend which has extended for six months.