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Informe Mensual Económico Financiero N° 343 – Septiembre de 2018

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of 2019 could fall to 10-11 billion dollars, equivalent to 2.5% of GDP, half of that

observed in 2017.

The inflation rate, on the other hand, shows a strong resistance to converge at lower

levels. Until July the CPI accumulates a variation of 19.6%, the PPI 36.5% and the

exchange rate 45.2% (including the August´s jump the variation in the first eight

months is about 97%). The gap in favour of the exchange rate against prices suggests

a pass through pending and that of the PPI over the CPI that the commercial chain

and private services are moderating the increase in goods.

The exchange rate´s jump happened in August and the need to maintain the real

exchange rate, in order to raise domestic savings, implies that CPI increase in 2018

will be around 45% at the end of the year (3.7% monthly from September to

December) limits the possibility of using the exchange anchor. These increase in

relation with previous target (32%) should be renegotiated with IMF.

Macroeconomic stability in the last four months will rest on a delicate balance whose

components will be: i) the financing of the deficit of the period (estimated in 405 billion

pesos, of which 70% corresponds to primary deficit, bonuses through); ii) the renewal

of the LETES stock (Treasury notes); iii) the implementation of the “non-banks”

LEBAC (Central Bank notes) reduction program announced by the Central Bank.

A preliminary exercise suggests that the fall of the “non-banks” LEBAC stock

promoted by the Central Bank (350 billion pesos) could have four destinations: i) an

increase in fixed term deposits (60.0); ii) LETES in pesos (100.0); iii) an increase of

the Monetary Base (110 billion pesos); iv) purchase of dollars (80 billion pesos, about

2.7 billion dollars, that would come from the Chinese swap). To ensure this soft

landing, it would be necessary for banks and LETES in pesos to offer competitive

interest rates (the latter would contribute to finance a third of the fiscal deficit of the

period).

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

esta Síntesis Ejecutiva.