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Informe Mensual Económico Financiero N° 338 – Abril de 2018

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In the first quarter of the year, the cumulative inflation rate was around 6.5% and in

the first semester it would reach 10.5%, almost 70% of the annual target, driven by

the increase in public services prices and by the sliding of the exchange rate to

about ARS 20.50 by dollar.

While this allowed for a moderate improvement in the real exchange rate, the

Central Bank began to intervene in the exchange market since March 5, to mitigate

exchange pressures and curb the

pass through

to prices, particularly notable in the

increase of wholesale prices in February. March sales amounted 2,040 million

dollars.

This shift in monetary policy seeks to facilitate the end of wage negotiations still

pending and avoid the risk of anticipating the discussion of compensations due to

the resilience in inflation rate, which most agreements foresee in the event that

inflation does not subside. The reduction of the interest rate will be moderate.

The amount of transactional money (coins and notes in public hands, demand

deposits and saving accounts) available in the economy is unusually high and has

been growing above nominal GDP, accompanying the monetary expansion of fiscal

origin. One explanation is that more people, for example the beneficiaries of social

plans and pensions are becoming users of banks services.

The Current Account deficit in 2017, 30.8 billion dollars, duplicated the one of 2016.

A first estimate of the first quarter of 2018 suggests that the deficit of the period

would reach 11.0 billion against 7.2 billion from the same period of 2017. These

figures confirm the hypothesis that the deficit of the Current Account will reach 5%

of GDP in 2018.

In 2017, GDP grew 2.9% compared to 2016, driven by investment (11.3%). From

the supply approach, Gross Domestic Added Value increased by 2.6 with respect to

2016. In the Goods producing sector, Construction stood out with 10.4%, while the

Manufacturing industry grew 2.8%. In Services, the largest advance corresponded

to financial intermediation (5.1%). By 2018, GDP, growth is estimated at 2.8%,

taking into account the negative effect of the drought on the farm sector.

El IAEF agradece la colaboración de la Sra. Marta Álvarez – Executive English en la traducción de

esta Síntesis Ejecutiva.