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IMF
postpones disbursement under stand-by agreement
The International Monetary Fund (IMF) has postponed the disbursement of
a US$ 728 million payment agreed to under the terms of the US$ 13.3
billion stand-by agreement approved in September last year, despite the
fact that the government has met key economic targets related to fiscal
and growth objectives. Fund officials have decided to postpone the
final approval, citing disagreement over fiscal targets, a lack of
progress on utility contract renegotiations, the deferral of reforms to
the current co-participation revenue arrangement between the federal
government and the provinces and delays in the debt restructuring with
international investors. The government is arguing that the
over-compliance in major economic targets should warrant a waiver on
reforms. However, officials are likely to attempt to progress more
rapidly in the coming months since other loans from multilateral
institutions are tied to IMF approval and further delays would require
tapping reserves.
Economic
growth robust but slowing amid stronger comparison base
Recent data suggest that economic activity remained healthy in the
second quarter of the year but that the high growth rates observed in
the past are beginning to drop. In May, the monthly indicator for
economic activity (IMAE, Estimador Mensual de Actividad Económica)
increased 4.9% over the same month last year, which was down from the
5.7% expansion observed in March. The May slowdown was the second
consecutive monthly deceleration. However, a month-on-month
comparison indicates that the economy remained on a positive expansion
path. In seasonally adjusted terms, economic activity rose 0.88%
in May over the prior month, when the IMAE had declined 1.90%.
Growth
in supermarket sales slows
May supermarket sales suggest that lower interest rates and declining
unemployment continue to drive robust private consumption activity.
According to the National Statistical Institute (INDEC), supermarket
sales rose 11.3% in May over the same month last year, which was a
deterioration over April, when sales activity rose 15.3%. The
strong sales pace observed in clothing, shoes and household textiles
along with household electronics and articles drove up retail sales in
May. The current deceleration reflects the fact that the low
comparison base of the prior year is gradually giving way.
Industrial
production accelerates slightly
Industrial production also continues along a favourable growth path,
despite the energy crisis. In June, output rose 11.5% over the
same month last year, slightly above the 11.3% pace observed in May.
Motor vehicles, printing and publishing along with non-metal mineral
output experienced the strongest expansions. The recovery in
industry remains broad-based, as only base metal and oil processing
output dropped and most sectors remained in healthy growth territory.
Construction
activity remains buoyant
Similarly, construction activity remains well in double-digit growth
territory. In June, the construction sector’s output rose 30.7%
over the same month last year, up notably from the robust 22.9%
expansion in the prior month. Growth remained strongest in
oil-related construction activity, where activity was up 55.7% over June
last year, while housing construction exhibited the lowest growth rate
with a 24.6% rise in output.
The
current deceleration in overall economic activity reflects the stronger
comparison base last year, when the economy was embarking on an
expansion trajectory. However, economic growth continued to
proceed at a robust pace in the second quarter. The government
remains confident that the economy will grow 6.0% this year.
Consensus Forecast participants share the government’s optimism and
anticipate that activity will rise at an even more pronounced 7.0% pace.
This month’s Consensus Forecast figure was revised downward 0.1
percentage points, which puts an end to the trend of consecutive monthly
upward revisions since October last year. Additionally, next year,
growth is expected to slow notably to 3.9%.
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