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Informe Mensual Económico Financiero N° 339 – Mayo de 2018

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EXECUTIVE SUMMARY

The IMF projects a growth of 3.9% of the world economy by 2018, which would

be repeated in 2019. All regions of the world are linked to the expansion process

driven by Asia (6.5%).

While the risk of a rate war fades, the Federal Reserve’s decision to accelerate

the interest rate hike that boosted the yield increase of US Treasury bonds and

accentuated an outflow of capital from emerging economies, at the same time

that the dollar reversed its fall. The increase in the international price of oil is

another important note, with a significant transfer of resources from consuming

countries to producing countries.

In Argentina, the balance of the first quarter in terms of economic activity will

show a year-on-year improvement of around 4% (industry grew 3.9% in that

period). Everything converges to a GDP growth in 2018 of between 2.4% and

2.8%, if the volatilization in the exchange rate in April and May become

stabilized.

The fiscal result of the first quarter of 2018 registered a deficit of 91.5 thousand

million pesos, 29.6% higher than in the same period of 2017; total revenues

grew 22.3% and primary expenditure 18.5%. If extraordinary income is excluded

and all debt interests are computed, the deficit for the quarter would rise to 160

thousand million pesos and revenues would grow 18.1% (in line with primary

expenditure). Strong drop in economic subsidies and capital spending (see

figure 1).

The deficit of the Current Account of the Balance of Payments estimated for

2018 (35.0 billion dollars) will deepen in 2019, as the expansive stage of the

cycle continues: with an activity level 15% higher than in 2008, the external

result of 2018 shows a deterioration of 40.0 billion in the decade. This

represents a great vulnerability to the risk of deterioration in international

liquidity, which would force a correction that would negatively impact activity,

investment, employment and inflation (see figure 2).

Accumulated inflation for the first four months will be about 9.3% driven by a

combination of factors: monetary expansion (46% at annual rate in the second

half of 2017) of fiscal origin, currency slippage (23.3% between June 2017 and

April 2018), tariff correction, etc. Before the jump in the relation ars/dollar ending

April a deceleration from May onwards was expected, today in doubt.