Economic activity in Argentina

The economic situation in Argentina was in disarray with high inflation, fiscal deficit, and a host of other issues. Then a new president was elected in December 2015. In the last five years, economic activity has stagnated with a growth rate below the population growth. Argentina (FRN) is an important participant in the frontier markets. Let’s look now at the IMF’s (International Monetary Fund) projections for Argentina’s GDP growth rate.

Will Economic Activity Pick Up in Argentina Post Political Chaos?

Argentina’s GDP growth in 2016

Argentina’s GDP fell 2.1% year-over-year in 4Q16 compared to a 3.7% fall in 4Q15. Less growth can mainly be attributed to the following:

  • a fall in government spending of about 2.0% in 4Q16
  • a fall in investments and private spending in 4Q16 but less than the fall in 3Q16
  • recovery in exports and imports of 7.7% and 2.1%, respectively, in 4Q16

The economy expanded by 0.50% on a quarterly basis compared to a 0.10% rise in 3Q16. On a yearly basis, GDP contracted 2.3% in 2016, following a 2.6% expansion in 2015.

The efforts of the new government over the last 16 months have focused on restoring credibility and establishing sound economic policies for sustainable growth. The government’s efforts seem to have paid off with a growth expectation of around 2.2% for 2017, according to the latest IMF report. Growth is expected to be driven by higher exports and investments in 2017.

Recently, Standard & Poor’s (SPGI) upgraded Argentina’s long-term credit rating from B- to B. That comes as a relief to President Mauricio Macri who took over a shattered economy in 2015. Improved credibility for the government is evident through improvement in its external liquidity and access to commercial funding. The government issued external bonds of about $22.0 billion in 2016 and $7.4 billion so far in 2017.

The Global X MSCI Argentina ETF (ARGT), tracks the largest and most liquid securities with exposure to Argentina. The fund has allocations of more than 65.0% in sectors such as energy (XLE), information technology (XLK), and financials. It rose about 28.0% in 2016. Some of its top holdings include Tenaris (TS), MercadoLibre (MELI), and YPF (YPF).

Next, let’s look at the equities performance in Argentina.

Latest articles

19 Jul

Afya's IPO Sees Strong Listing Gains

WRITTEN BY Mohit Oberoi, CFA

Afya (AFYA) listed on the Nasdaq Global Select Market on July 19. The company priced its IPO at $19 per share.

19 Jul

What to Watch For in Amazon's Q2 Earnings

WRITTEN BY Sanmit Amin

e-Commerce giant Amazon (AMZN) is scheduled to report its second-quarter earnings results after the closing bell on July 25.

19 Jul

Barrick Gold Reaches Deal to Buy Acacia Mining

WRITTEN BY Anuradha Garg

After a long standoff, Barrick Gold (GOLD) and Acacia Mining (ABGLF) have reached an agreement.

19 Jul

Comcast Shares Pop on Goldman's Optimism

WRITTEN BY Ruchi Gupta

Comcast (CMCSA) shares popped after Goldman Sachs issued a positive note on the company recently. Goldman upgraded its rating for Comcast to "buy" from "hold."

19 Jul

Why Analysts Are Bearish on Netflix Stock

WRITTEN BY Aditya Raghunath

Netflix stock fell over 10.0% on Thursday and is down 0.5% today as well.

On Thursday, pet retailer Chewy (CHWY) reported its first-quarter results after the market closed. The company reported its earnings for the first time.