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  • Emerging Markets Debt Daily

    Argentine Economy Continues to Contract

    Natalia Gurushina ,Economist, Emerging Markets Fixed Income
    December 19, 2018

    The Argentine economy continued to contract in Q3, but mild recovery might be on the cards for the second half of 2019. Thailand’s central bank delivered a dovish hike, while Poland’s data flow should silence local hawks for now.

    Argentina’s national accounts statistics confirmed that the country entered technical recession in Q3. The gross domestic product contracted by 3.5% year-on-year in real terms and the high-frequency indicators suggest that the real growth will stay negative in Q4 as well. The International Monetary Fund (IMF) program requires that Argentina’s financial conditions should remain tight, and this will continue to weigh on interest-rate sensitive sectors. However, recovering agriculture (the end of severe drought), stronger growth in Brazil (check today’s nice consumer confidence print for December), and a larger contribution from net exports should pave the way for mild recovery in the second half of 2019 - just in time for the elections!

    Thailand’s central bank delivered the expected dovish hike this morning, raising the key rate by 25bps to 1.75% but signaling that policy normalization will be very gradual. The message is in line with the downward revision of 2018 and 2019 growth forecasts and the lower inflation projection for 2019, as well as with stated concerns about global environment. Even though today’s move reduces monetary accommodation, pre-election fiscal stimulus should help to offset its impact on growth.

    Poland’s data flow is in total agreement with the central bank governor’s dovish narrative. Industrial production continued to trend down in November despite a small upside surprise, while producer prices moderated more than expected to 2.7% year-on-year. Today’s releases come on the heels of massive downside surprises in core and headline inflation, strongly suggesting that the central bank’s hawks will stay silent for most of 2019.



    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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