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August 10, 2021

The Week at a Glance

Argentina: Elections and Trash Under the Carpet

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

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( 2 mins)

The economy is already in electoral mode. June was a very good month in terms of economic activity, recovering the setback of May and even more. July was not so good from the point of view of the production of goods, but services are going to bring good news with the reopening. The government did or will do everything in its power to boost consumption. The list is long and includes holding up the prices of the dollar, of the utilities, and of the gasoline; bonuses for pensions, reinforcements for social programs and increases in the minimum wage; and the consent of more generous collective bargaining agreement and new income tax cuts, among other measures.

Confidence: The Key to “External Restriction”

In the first six months of the year, the current account surplus, explained by the extraordinary international prices, together with a caped deficit in the financial and capital account, thanks to the capital controls, improved the international reserves position. However, both situations are not sustainable in the medium term. Sooner or later, the new commodity bull cycle will be reversed, and the program with the IMF will require, among other things, that there be fewer impediments to dividend payouts, debt payments and capital flows in general. The challenge to the government, therefore, is to regain trust before international prices return to “normalize”.

Activity Level: Rebound in June, Doubts in July

The storm is over. After a May that, mini-quarantine in between, was terrible for both producers of goods and service providers, in June different indicators went from red to green and among them Industry and Construction stood out, whose data were published last week by INDEC and they were extremely positive. Will they hold?

Econviews-Weekly-August-9th-2021

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