Argentina. One last look before the year ends

• The Argentine economy appears to have had a decent third quarter (3.5% GDP y/y??). Source CE.

• However, the relatively good performance of the economy has come on the back of an increase in government spending ahead of elections that were held earlier this year. (Super-loose fiscal policy has caused public spending to reach 33% of GDP)

• And higher government spending has been financed by a faster pace of peso printing at the central bank.

• As such, the recent growth burst is unsustainable as the balance of payment crisis rumbles on (Fx reserves near the 30bn$, or 5 months of imports equivalent).

The authorities allowed the pace of depreciation of the official peso exchange rate against the dollar to accelerate. The peso is now worth 6.3/$ in the official market and could head towards 8/$ next year.

Regards

Àlex Fusté

Chief Economist

Andbank