Argentina Macroeconomic Perspectives

Argentina: Following primary elections, the economic outlook made a significant turn

• More than two weeks after primary elections, and despite fiscal stimulus measures to underpin consumption, the outlook for the second half experienced a meaningful change. First, peso depreciation modified inflation expectations for the coming months, as monthly inflation is expected to rise from 2.5% to over 4% as from August.
• Moreover, GDP contraction estimates increased from -1.8% to approximately -3%. According to the last activity report, the monthly activity index (EMAE) fell 2.6% during the first half and 0.4% mom s.a. in June. The agro sector has been the main growth driver since late last year, attaining annual growth above 40% during 2Q. However, main sectors remain in negative terrain, and as agriculture production eases in 3Q, the negative effect will become more evident.
• The trade balance attained a USD 951 million surplus in July, also reflecting the farming sector´s good performance. Cereal, oil and red meat exports were close to USD 3.000 million, half of the month´s total exports, offsetting falling commodity prices with larger quantities sold. Sector companies settled funds for USD 2.250 million in July, and USD 13.000 year to date. These helped sustain exchange rate stability during great part of the year.