1、ArKEYArgeshowThis growWe hon tcarryHowDec/Avaiindicprobthe pFiSourEM EFlorenAndrergentinY MESSAentinas high-fwing signs of acompares powth,followed bhave revised othe stronger yover from 201wever,higher i/Dec)could liklable,partiacators for Febrably expandepreliminary nuig.1:Monthly Grces:Indec,Macr
2、obo-7-5-3-11357Feb 17JunIndustFO11 ACONOMICS Our schangaboveGivenOctobExternquestArgenCDS)ArgenMARncia Vazquez,Ecoe Digiacomo,EM/Lna:TenGES frequency,paa moderate grsitively with oby an agricultuour 2019 growQ1 perform18.nterest rates kely hurt growtal industrial ruary suggest ed for a secoumbers fo
3、r MaGDP,IP,constond,BNP Paribas n 17Oct 17FebMontrial production(RHS)OCUS|EApril 2019 strategy team ge their bearise 905bp,respn the financiaber,the team bnal funding cation the counntina CDS sin.The trade wntinian leg,+42RKET VIEWonomist|BNP PaLatam Strategist|ntative artial indicatoowth in Q1 20ur
4、 previous foure-driven bouwth forecast tomance and land inflation(th in the remaand constthat the Argenond straight march are not truction activityb 18Jun 18Octnthly GDP proxyConstructioEMbelieves that sh view on Arectively,reflecal and fiscal vbelieves that tapacity(ex-IMtrys ability toce August 20
5、was closed on2bp on the BrWaribas Sucursal Bu Banco BNP Paribsigns oors are alrea019.orecast of flat Qnce in Q2.-1.2%from-1lower statistic(now seen at inder of 2019.ruction activntinian econommonth.Althouupbeat,positiy(%y/y,3m M-24-20-16-12-8-404812162024t 18Feb 19n(RHS)although thergentinian asscti
6、ng an implievulnerabilities there is more tF)will be keyo tap the ma018(in relativen Wednesdayrazilian leg,+0uenos Airesbas Brasilof econady Q1 1.5%cal 34%.vity my ugh ive grthWmq/bya poO(pnesuHoseintoA)F Sourc-9-7-5-3-113579Fere might be ssets.1y,2y aed default proand uncertato go,especiay for Arge
7、ntinaarkets.The ste value againsy 10 April for 0bp on the Colnomic rowth in the fire case for theWe are thus modestly to 0.2/q(sa).We exy a weather-resevere drougost a 36%y/y verall,we noprevious forecegative statisurprise in Q1 2owever,we aecond half of terest rates too be more modig.2:Monthly ces:
8、Indec,Macroboneb-13Feb-14some green shand 5y CDS aobability of 15-inties surrounally in the fronta in 2020-23.Ttrategy teamst a basket ofa P&L of 510lombian leg an stabilirst two monthe first quarterlyrevising our 2%q/q(sa),froxpect a more elated bounceht in 2018,agrecovery.w expect annast-1.5%).Tti
9、cal carryove2019 growth.are lowering the year as o last longer.Wdest in Q3 andGDP proxy andnd,BNP Paribas Feb-15FeEMAEPlMhoots,this maare trading at-20%(1y and nding the pret end.The inverted Chad been pof Brazil,Mexic0bp.Of this,nd-4bp on the|FOCsations of the year y expansion siQ1 real GDPom the p
10、reviovisible expane in agriculturagricultural prodnual real GDPhe revision ster from 2018our quarterlywe expect hWe currently ed flat in Q4.d BNPP growtheb-16Feb-17Growth proxlease refer to impMAR disclosures aay not be eno942bp,1006b2y)and 47.5%esidential elecCDS curve caositioned in loco and Colom
11、+472bp was e Mexican legCUS11/04/19is sufficient toince Q4 2017.P growth forous flat readingnsion in Q2,dal production.duction is poisP to contract tems from a l8 and the poy forecasts foigher inflationexpect GDP gh tracker(%y/yFeb-18Fexyortant informationt the end of this reough tobp and%(5y).ction
12、 inalls intoong 5ymbia 5yon the.1 9o seal.recast g of 0%driven After sed to 1.2%ower,ositive or the n and rowth y)eb-19n andeport 2|FOCUS11/04/19Florencia Vazquez,Economist|BNP Paribas Sucursal Buenos AiresAndre Digiacomo,EM/Latam Strategist|Banco BNP Paribas BrasilContraction expected to be smaller
13、 in 2019 despite weak H2 The financial crisis that started in May 2018 and the sharp monetary and fiscal adjustments that followed sent the economy into a deep recession.Indeed,real GDP contracted in every single quarter of 2018;the total contraction on a q4/q4 basis stood at 6.5%.Markets have been
14、pondering over when the economy will start showing signs that a bottom has been reached.Partial available data suggests that a bottom was probably reached in Q4 2018 and that real GDP started to grow again(albeit modestly)in Q1 2019(Fig.1).While the official monthly GDP proxy published by INDEC show
15、ed an expansion of 0.6%m/m in January,industrial and construction activity reports for February have also shown a monthly,seasonally adjusted advance.This is probably consistent with another monthly real GDP gain in February.Our own proxy*for monthly economic performance suggests that the annual pac
16、e of contraction continued to moderate in February(Fig.2).However,the partial data released so far for March have not been as encouraging.Still,the advances of the previous months suggest that the quarter probably saw a modest 0.2%q/q(sa)expansion.If our forecast is correct,this would be the first p
17、ositive reading since Q4 2017.The consensus,according to the last survey released by BCRA,also looks for a small 0.3%q/q(sa)real GDP gain.The expansion is likely to continue in Q2 2019,when an agriculture-driven bounce is forecast.Indeed,agricultural production contracted 22%in 2018,severely hurt by
18、 extremely dry weather conditions.We now expect agricultural output to expand at a vigorous pace of 36%in 2019(Fig.3).The bulk of this positive impact will be seen in Q2,when most of the harvesting is done.We are trimming the annual GDP 2019 forecast to-1.2%(from the previous-1.5%).This revision ref
19、lects a smaller negative statistical carryover from 2018 and the upward revision to the Q1 forecast.We also expect a weaker second half of the year,but the positives outweigh the negatives and the net impact for the full year is a small improvement.Beyond the specific impulse from agricultural activ
20、ity,we do not expect the economy to show a strong recovery.The driver of growth beyond Q2 could be consumption.Indeed,a small,temporary recovery in purchasing power can be expected as most wage negotiations will be finalised by end-Q2.Also,the provincial election calendar suggests public employees a
21、re likely to get wage increases in the coming months(see Argentina:Election Tracker for more details).These wage increases(after a visible plunge in 2018,Fig.4)could provide a temporary boost to consumption.However,consumer price inflation has been higher than anticipated in Q1 and is expected to re
22、main high in April.Some relief is expected from May/June onwards but any improvement in real purchasing power is likely to be smaller than originally expected.We are thus trimming our Q3 real GDP forecast and expect a flat performance in Q4(Fig.5).Amid FX market volatility,which is likely to intensi
23、fy as we approach the August national primaries,interest rates are expected to stay higher for longer.Against this backdrop,we are revising up our year-end policy rate forecast to 45%.Higher rates and financial market volatility are also likely to take a toll on economic activity.Fig.4:Real wages(%y
24、/y,deflated by headline CPI inflation)Sources:Indec,Macrobond,BNP Paribas Fig.3:Agricultural output1(mn tonnes)Fig.5:Real GDP growth and forecasts(%change)Sources:Secretary of Agriculture,Cattle and Fishing,Macrobond,BNP Paribas 1.Includes wheat,soybean,corn and sunflower.Sources:Indec,Macrobond,BNP
25、 Paribas-15-10-50510Mar 17Sep 17Mar 18Sep 18Mar 19BNPP estimates020406080100120140707580859095000510152018/19 estimate-20-15-10-505101520Q1 2013Q1 2015Q1 2017Q1 2019%y/y%q/q,saarBNP ParibasforecastsEM ECONOMICS*We estimate monthly economic activity by using a two-step procedure.First,we implement pr
26、incipal component analysis(PCA)to extract a common latent factor from a variety of comprehensive economic activity indicators.Second,we use the common factor to forecast the monthly proxy of GDP by ordinary least squares(OLS).LEGThis purpoobjecrecasis noindepThe ccontaMarkePleasone oSTEEMARKThis dde
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30、.In prents.Any referenrmance simulationP,and should not soever(including ie possibility of sucment there is no inP may make a ma and other similarsuch information mP may have a finaderivative instrumcity for any personding acting as adment with any pen,or the analysis oext three months ons of this d
31、ocumedocument is for inined herein have es where conside may or may not ipants.BNPP expprice sources useative price(s)do nound,(iii)the calcactions by BNPP P may face conflicge in transactions document may cog a defined periodocument are for ilocument and mamation has been pmptions may yields such a
32、s liquidityrmance.document is only iss it with you on ation of the meritsprospectus,an ad.S.or any other procument may invicipated market ddity.In certain trament is illustrative results.Informatg set forth herein TICE been written by austive analysis,ort.This documeancial Instrumenesearch for the s
33、tment researchocument/commut is intended for ckages,or firmsyour firms respobal Markets Researk of BNPP.de mark of BNP Putes a marketing cMarkets in Financifalling within Articted(together“Rely to and will be enerein may not be epinions contained eness or fitness foP,any of its subsany representatio
34、ment and it should ot constitute or forof its distribution fointo between the ns contained in thgment by any recroviding this documnce to past perfons are the result ofbe used as guidan negligence)for ch losses.All estntention to update arket in,or may,ar information inclumay be subject toancial int
35、erest in aments based theren mentioned in thisdviser,manager,erson relating to thon which it was bafrom or in relatioent prior to its pubnformation purposbeen prepared in ered relevant.Indibe taken into accpressly disclaims ad,any errors or ot represent(i)theculation or estimain its own books cts of
36、 interest,whin a manner inconontain certain perfd of time.To the ellustrative purposeay be subject to cprepared in good d different resultsy constraints,feesntended to generthe understandins and risk of the indvertisement,a purovince or territoryvolve a high degrdevelopments,risnsactions,countee and
37、 no assurancion herein is beliereflect our judgmour Strategist aand may be subjent is non-indepnts Directive(201purposes of Mi,and is not subjunication may alsthose firms whos that are out of onsibility to ensuearch packages,eParibas communication anial Instruments Dicle 19(5)of the Finlevant Person
38、s”)ungaged in only wieligible for sale in in this document or any particular pusidiary undertakinn or warranty,exnot be relied upom any part of anyorm the basis of,recipient and BNis document are pcipient,are subjement,BNPP doesormance is not inf estimates made ance,in any wayany direct or contimate
39、s and opiniothis document.as principal or agded in this docum rapid change andany issuer or perseon,or vice versa.s document.BNPunderwriter or lehe production of tased,before the don to any person lication in order toses only and thergood faith in acccative price(s)bacount.Therefore,any responsibili
40、ty fomissions in come actual terms on ate of an amountof account for finhich are resolvednsistent with the vformance data basextent any such pes only.All estimachange without nfaith in accordan.Unlike actual pes and transactionsate discussion regng that you havenformation and anublic offering,an oy
41、nor shall it be deee of risk and thek of counterpartyerparties may losece is given that aeved reliable but ment at the date aand Economist teject to conflicts endent research14/65/EU)(MiFID iFID II.It has nect to any prohibso contain“Reseo are either in scscope of the Miure that you do nexcept where
42、 yond has been preprective(2014/65/Enancial Services aunder the regulatiith Relevant Persoall jurisdictions or have been obtainurpose of such infngs or affiliates orpress or implied,n as such.y offer to sell or issor be relied on,iNPP,such transacpublished for the ct to change withs not offer invest
43、mndicative of futureby BNPP,as of a,of future performsequential loss arons included in thgent,buy or sell sment are included d there is no certason mentioned in.BNPP,includingP may,from time ender)within the this document.BNdocument was pubmentioned in thiso verify its factual re is no assurancordan
44、ce with BNPased on different mthese indicative pfor the accuracy omputing or dissemwhich a new trant that would be pnancial reporting,under applicableviews expressed insed on back-testierformance data ates and opinions notice.This type nce with BNPPs erformance recors costs.Actual hisgarding particu
45、lar e sufficient knowleny proposed structoffer to sell securieemed to provide e value of such ty or issuer defaulte their entire inveny indicated returBNPP and its affnd time hereof aneams within theof interest resulth for the purposeII),non-indepennot been preparbition on dealingearch”as definecope
46、 of the MiFIFID II unbundlinnot view or use thur firm is out of spared by BNPP foEU)(MiFID II),anand Markets Act 2ons of any relevaons.Any person wr to certain categoned from,or are bformation and sucr its members,dias to the accuracsue and is not a soin connection withction will be enterinformation
47、 of rechout notice and nment,financial,lege performance,wa given moment,omance.To the fulrising from any ushis document aresecurities of any isfor information puainty that transactithis document,in its officers and eto time,solicit,pelast 12 months fNPP may to the eblished.BNPP mas document.Any accu
48、racy.ce that a transactPPs own internal models or assumprice(s)may vary or completeness ominating these indsaction could be epayable following credit or risk mane legal provisions n this document,eng,i.e.simulationis included,the sincluded in this dof information haown internal modrds,simulated pest
49、orical or back teproducts and inveedge,experiencetures.The informaities described heinvestment,tax,atransactions may t,risk of adverseestment or incur arns,performance filiates do not warnd are subject to e BNP Paribas gting from their ine of the UK Finanndent research cored in accordang ahead of th
50、e disd under the MiFID II unbundling g rules and therhe Research conscope of the MiFor,and is directed nd(b)where relev2000(Financial Prant jurisdiction.Anwho is not a Releries of investors.ased on,public soch information marectors,officers,acy and completenolicitation of any oh any contract or red
