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June 28, 2021

The Week at a Glance

Argentina: The Descent Into Insignificance and the (Long) Road to Recovery

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

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Argentina backed down two categories in the world of financial investments. It is now a “stand alone” market, which could be interpreted in a free translation as “unclassifiable”. Or, more formally, “independent”, although we do not know of what it is independent! It is the fourth category after developed, emerging and frontier, according to the classification carried out by MSCI. There is no fifth category. Lebanon had been the last to fall to “stand alone” in February. In practice, this implies that there is a group of investors who invest in emerging or frontier markets that will not be able to buy Argentine stocks. In other words, the potential of financial flows that can come to Argentina is reduced.

 

Fiscal Accounts in Order: Transitory or Permanent?

After a disastrous 2020, fiscal accounts have showed a significant improvement so far this year. In effect, May’s fiscal accounts closed with a primary surplus of ARS 25,714 million. Affected by the very low base of comparison, revenues soared 116.8% y/y, while primary expenditures, with a very high comparison base, grew just 18.3% y/y or 48.1% if “Covid spending” is excluded, according to the Ministry of Economy. In Econviews we ask ourselves: how long will this sort of “fiscal peace” last and what can we expect for the second half of this election year?

 

Unemployment: Better-Than-Expected Data Doesn’t Change the Grim Picture

The unemployment rate was 10.2% in the first quarter of 2021. The data is better than expected. It implies a marginal drop compared to the first quarter of 2020 and a slight rise compared to 2019. The first quarter of 2020 was practically normal because the pandemic started with the household survey completed or practically completed.

 

The “B-Side” of Macroeconomic Aggregates

This week INDEC released the data corresponding to the National Accounts and the International Accounts of the first quarter of the year, the macroeconomic aggregates. In other words: the figures of the GDP and its components together with those of the Balance of Payments, which includes the Current Account and the Capital and Financial Account. Beyond the fact that the data lag makes its “first look” analysis less relevant, there is a “B-side” that is interesting to look at in terms of trends that are registered and that will be important to follow in the future. An interesting fact is that while the GDP grew 2.5% year-on-year, the value added only grew 2%. The difference? Taxes took a growing part of GDP: they went from 17 to 17.5% of GDP.

 

Econviews Weekly June 28th 2021

More by Alejandro Giacoia, Andrés Borenstein, Miguel A. Kiguel, Lorena Giorgio, Isaías Marini