Despite improvements in some local financial variables, such as the agreement with the International Monetary Fund (IMF) that closed last month or the reduction of the exchange gap due to the significant collapse of the financial dollars.s, the prospects for Argentina have failed to improve, in this case not good for external variables.

According to the Index of Financial Conditions (ICF) prepared monthly by the IAEF in conjunction with consulting firm Econviews, in March, international conditions fell to almost the same level as seen in April 2020 when the Coronavirus pandemic completely affected the world’s markets.

In particular, the index went from -69.4 to -106.1, the worst record since June 2020.The international wind picked up and blew hard last month. So much so that external conditions have become negative and the small improvement in local financial conditions was completely unnoticed. Compared to March 2021, the decline in the index exceeded 61 points, ”the IAEF said in a statement.

Although the deepening war in Ukraine and its impact on the global economy is one of the variables explaining the deterioration of conditions, not just this. Among others, the ICF identified the greatest volatility of raw materials, shares and currencies of emerging countries. Besides, worsening global liquidity and emerging risks.

At the local level, although some variables have improved in recent months, the ICF remains the same. areas of financial stress where he fell over three years ago. One of the few factors that remains positive is the confidence in banks and the liquidity of financial institutions.

“As long as we hold it, this is not good news.. The lack of demand for credit and the increase in government financing in the form of bonds are improving the index, but it doesn’t leave much to celebrate because loans to the private sector as a percentage of GDP does not reach 10%“, they explained to the IAEF. They recalled that this amount could reach 20%.

“The most stressed part is the common suspects: exchange rate gap, country risk, inflation and expected devaluation. This month, the interest rate was added after the third increase imposed by the Central Bank. The irony is that this is a relatively negative interest rate in real terms, ”they added.

The “wind up front” is not good news for Argentina. “Argentina’s economy has always grown steadily when financial conditions have remained in the comfort zone for a long time.. 2020 is no exception: with an international headwind for most of the year and negative local conditions throughout the year, GDP is down 9.9%, ”the economists explain.

Despite the fact that the country remains isolated from global financial markets, rising inflation around the world could have an impact due to rising import prices. In addition, the deterioration of financial conditions could affect the country’s trading partners and leave it with less room to continue buying from Argentina. This fear is partially mitigated by rising food prices.

YN