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  • Emerging Markets Debt Daily

    Argentina: Macro Pain, Fiscal Gain

    Natalia Gurushina ,Economist, Emerging Markets Fixed Income
    April 23, 2019
    Argentina meets its Q1 fiscal target, which is a major condition for continuing International Monetary Fund support. South Africa’s leading indicator is not a game-changer for the growth outlook.

    Argentina’s commitment to fiscal adjustment is commendable
    . The government was able to meet its Q1 primary balance target, posting the first surplus (0.1% of gross domestic product) in many years. The problem is that the rest of Argentina’s data flow looks problematic, and this may weigh on budget performance in the coming months. Further, the government’s decision to use price controls to cap inflation raises concerns about potential fiscal costs. The political landscape is also becoming more complicated, with the latest opinion polls showing a bigger lead for the former president Cristina Fernandez de Kirchner.

    South Africa’s pre-election “fever” is getting stronger, with more and more references to “Ramaphoria 2.0” (largely irrational excitement about the structural reform agenda after the elections). The country’s macro backdrop, however, is less reassuring—this morning’s soft leading indicator is yet another case in point. A tiny rebound to 104.9 in February is not a game-changer, and it helps to explain why the consensus cut South Africa’s Q1 growth forecast to a mere 0.85% year-on-year and the full-year forecast to 1.4%.

    Poland’s below-consensus retail sales signals that the central bank can take its time before shifting to a more hawkish policy gear. The retail sales yearly growth moderated to 3.1% in March, with no changes in the underlying trend (down). The pre-election spending package points to potential upside risks, but so far authorities have proven to be more fiscally responsible than the market expected. 

    PMI – Purchasing Managers’ Index: economic indicators derived from monthly surveys of private sector companies; ISM – Institute for Supply Management PMI: ISM releases an index based on more than 400 purchasing and supply managers surveys; both in the manufacturing and non-manufacturing industries; CPI – Consumer Price Index: an index of the variation in prices paid by typical consumers for retail goods and other items; PPI – Producer Price Index: a family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time; PCE inflation – Personal Consumption Expenditures Price Index: one measure of U.S. inflation, tracking the change in prices of goods and services purchased by consumers throughout the economy; MSCI – Morgan Stanley Capital International: an American provider of equity, fixed income, hedge fund stock market indexes, and equity portfolio analysis tools; VIX – CBOE Volatility Index: an index created by the Chicago Board Options Exchange (CBOE), which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities on S&P 500 index options.; GBI-EM – JP Morgan’s Government Bond Index – Emerging Markets: comprehensive emerging market debt benchmarks that track local currency bonds issued by Emerging market governments.; EMBI – JP Morgan’s Emerging Market Bond Index: JP Morgan's index of dollar-denominated sovereign bonds issued by a selection of emerging market countries; EMBIG - JP Morgan’s Emerging Market Bond Index Global: tracks total returns for traded external debt instruments in emerging markets.

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