2013-10-18 17:23:41 - New Country Reports market report from Business Monitor International: "Argentina Business Forecast Report Q4 2013"
Data indicate that Argentina saw economic activity pick up more than expected in the second quarter of the year, raising the likelihood that we will revise up our 2013 real GDP growth forecast of 1.8% once we see data from Q213. That said, we believe over the longer term there are significant downside risks to Argentina's growth picture, as long-building imbalances both in the domestic economy and in the external accounts persist.
We forecast that Argentina's balance of payments picture over the next several years will be weaker than during much of the past decade, with the current account balance hovering around 0.0% of GDP over the next several years. This current account forecast assumes continued weakening in both goods and
services exports, the result of lost competitiveness from high domestic inflation, and marks an abrupt narrowing from a current account surplus that averaged 2.4% of GDP over the past decade.
Full Report Details at
- www.fastmr.com/prod/694749_argentina_business_forecast_report_q4 ..
Expenditure and revenue growth trends in the first six months of 2013, along with our expectations of strong spending in advance of the October midterm election, lead us to believe that Argentina's primary and nominal fiscal deficits will be wider than we originally forecast. We have revised these forecasts for 2013 and 2014 to reflect greater deterioration in the country's fiscal accounts, and highlight that additional downward revisions are possible.
Major Forecast Changes
While we maintain our view for currency weakness, we are revising slightly both our 2013 and 2014 currency forecasts, as well as our view on how the Argentine government will manage the peso. Earlier, we had expected substantial downward pressure on reserves to force the government into a large, one-off devaluation, but the Argentine government has instead dramatically increased the rate at which the crawling peg depreciates. We now believe continued depreciation is more likely than a one-off devaluation, and forecast and end-2013 exchange rate of ARS6.000/US$.
Key Risk To Outlook
Risk To Real GDP Forecast: We believe that we may revise up our 2013 real GDP forecast due to stronger-than-expected growth in Q213, but many of the long-standing imbalances in the Argentine economy remain, including very high consumer price inflation, expansionary monetary and fiscal policies, and unstable external accounts. As such, we believe there is the risk of a sharp slowdown in growth over the medium term.
Risk To Political View: Fernandez has proven willing to spend heavily in the run-up to elections in order to ensure support for the FPV. While such an effort over the next several months could potentially improve public opinion of her and her party ahead of the October legislative election, we maintain our view that she will not have enough political support to change the constitution and run for a third term as president in 2015.
Partial Table of Contents:
Major Forecast Changes
Key Risk To Outlook
Chapter 1: Political Outlook
BMI Political Risk Ratings
FPV Defeat In October To Empower Moderates
- Recent polling data and the results of the August primary election reaffirm our view that the ruling Frente Para la Victoria (FPV) will lose to the opposition Frente Renovador in Argentina's midterm congressional election in October. We believe this result will ensure that President Cristina Fernandez de Kirchner does not have the congressional support to amend the constitution and run for a third term, empowering more moderate political voices.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Significant Structural Challenges Ahead
- Argentina scores above average for Latin America in our Long-Term Political Risk Ratings, but we see growing policy challenges that the country must confront over the next decade. Moreover, Argentina's increasing international isolation and the continued dominance of the ruling Frente Para la Victoria party limit policy options. If the government cannot address high inflation and a weakened business environment, we believe it will likely face a sharp macroeconomic adjustment over the next decade.
Chapter 2: Economic Outlook
BMI Economic Risk Ratings
Stronger Q213 Poses Upside Risk To GDP
- Signs indicate that Argentina saw economic activity pick up more than expected in the second quarter of the year, raising the likelihood that we will revise up our 2013 real GDP growth forecast of 1.8% once we see data from Q213. That said, we believe over the longer term there are significant downside risks to Argentina's growth picture, as long-building imbalances both in the domestic economy and in the external accounts persist.
TABLE: GDP BY EXPENDITURE
Balance Of Payments
Lost Competitiveness To Weigh On Current Account Dynamics
Full Table of Contents is available at:
About Business Monitor International
Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at www.fastmr.com/catalog/publishers.aspx?pubid=1010
About Fast Market Research
Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.
For more information about these or related research reports, please visit our website at www.fastmr.com
or call us at 1.800.844.8156.