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April 5, 2021

The Week at a Glance

Argentina: Poverty, the Most Important Deficit

BY Miguel A. Kiguel, Alejandro Giacoia, Andrés Borenstein, Isaías Marini, Lorena Giorgio, Rafael Aguilar

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Editorial: Poverty, the Most Important Deficit

In line with expectations, The Statistics Agency announced that 42% of Argentines are below the poverty line. The data correspond to the second semester of last year and marked a rise of 1.5 points compared to the data of the first semester, which was when the quarantine had hit the most in informal employment, which in any case continues to be hardly hit. This implies that there are more than 19 million people whose household income does not cover a minimum basket. Additionally, 10.5% of the population is indigent, that is, almost 5 million people, extrapolating the sample of the 31 cities surveyed to the rest of the country. If you look at households, the numbers look better because there are 31.6% poor households and 7.8% indigent.


Although We Don’t See It, The Base Is There

The year began with a certain calm, both on the exchange and monetary fronts. The FX spread is under control, mainly thanks to the BCRA selling bonds in dollars against pesos and then repurchasing them with reserves, which also contributes to absorbing the monetary base. The latter expanded just above ARS 20 billion so far this year, while the BCRA bought foreign currency in the market for the equivalent of about ARS 120 billion. But of course, as a counterpart, the stock of reverse repos and Leliqs grew more than ARS 320 billion. A greater necessity of monetary issuance will come in the second half of the year, also increasing the need for sterilization in a context in which the Central Bank’s liabilities are already at worrying levels.The Economic Recovery of 2021 Has Already Happened

Economic activity surprised with an advance higher than expected by the market, growing 1.9% in January compared to December in seasonally adjusted terms. Even so, activity has not yet reached pre-pandemic levels: in January, the EMAE was 1.3% below the level of February 2020. In year-on-year terms, the record remained at -2.0%, the same as in December. Our model captured this rise, but this year’s seasonal adjustment is particular because the pandemic makes the models less robust. In February our data, still preliminary, show a high probability that the recovery will be interrupted. If the activity were completely stuck out from January onwards, the annual growth would still be 8%. At the moment we continue to think that it will be 7%, although there is a higher probability of an increase than a decrease. The intensity of the pandemic will be one of the key variables.


An “Express Midweek”

The Central Bank once again applied the brakes and further decreased the rate of daily depreciation of the exchange rate. From the daily advance of 0.08% to which we got used the previous week, it went to one of just 0.04% last Tuesday and 0.03% on Wednesday 31st. Thus, the official dollar closed March at ARS 91.985, and on average ended 2.7% above February, in a month where monthly inflation estimates are well above 3.5%


Econviews Weekly April 5th 2021

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