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April 19, 2021

The Week at a Glance

Argentina: From Gloom to Doom

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

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Editorial: From Gloom to Doom

The measures announced this week, aimed at containing the impacts of Covid’s second wave, come at a bad time, beyond the controversy with education or institutional issues regarding Buenos Aires autonomy. The last two treasury bond auctions failed. After a string of good auctions, in the last two the bids were scarce, even with the participation of ANSES or other public agencies. While it is premature to venture, this challenges our premise that the market finances ARS 600 billion of the deficit this year and if our assumption fails, there will be more money issuance. We estimate that the government has the legal margin to do so. This in turn would make the government’s strategy to prevent the gap from widening (sell bonds in pesos and buy them back using reserves bought in the market) more expensive. We also see that the monetary issue with its lags has a hard impact on inflation since the 25.7% (58% annualized) inflation of the last 6 months is largely linked to the monetary issue of the previous months.

 

The Highest Inflation of the Year

This is how Minister Guzmán defined the March data before INDEC published it. In effect, with an increase in the CPI of 4.81% monthly, it was not only the highest record so far this year, but since September 2019, after the jump in the dollar after the primary elections. Thus, in the first quarter inflation reached 13.0%, while in the year-on-year comparison it was 42.6%. More alarming is the annualized data: taking the last quarter as a base, annual inflation reaches 62.8%, and 75.7% taking only March.

 

When the Shaking Stops (if It Does)

At 00:00 of Friday, the new measures in the AMBA began to take effect, which seek to slow down the contagion curve and which, in principle, would last until April 30. Recent experience has shown that in the face of an acceleration of cases lockdowns end up extending for a longer time than the period initially established. Furthermore, considering that the capacity of the intensive care system is relatively compromised.

 

REM versus Econviews: Similarities and Differences

At Econviews we are in the habit of debating projections. We look at consistency, we use models and analysts’ experience to reach an internal consensus. We also of course like to compare with what the rest of the profession thinks. Here is a summary of our projections and the differences and similarities we have with the market based on the monthly survey carried out at the Central Bank.

 

Econviews Weekly April 19th 2021

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