Argentina: Macri administration running out of time - Wells Fargo

Analysts from Wells Fargo, point out the recession in Argentina deepened further during the third quarter. “One year after taking power, the economy is not behaving as it was expected and time is running out as mid-term elections approach.”

Key Quotes: 

“According to the preliminary GDP release for the third quarter of the year, the Argentine economy plunged 3.8 percent on a year-over-year basis and fell 0.2 percent versus the second quarter on a seasonally-adjusted basis. Still, the quarter-on-quarter print was an improvement from the 1.9 percent collapse recorded in the second quarter and probably hints to potential stability down the line.”

“The Macri administration is running out of time to show that the changes in macroeconomic management are going to bear fruit and deliver economic growth. Mid-term elections are scheduled for 2017, and Macri’s coalition, with its already-small representation in the Argentine Congress, could suffer from waning support and make the last half of his administration even more difficult than the first half and threaten any possibility for re-election.”

“So far, the Macri administration has tried to use a mixed policy of macroeconomic management, a policy that includes a high fiscal deficit financed by accessing the financial markets. However, if growth does not surface soon, this policy could backfire, especially at a time when U.S. interest rates are expected to continue to increase.”