A survey indicates that the projections of consumption of Argentina in the medium term they would not be favorable due to various factors, beyond a possible improvement of the sector in the short term associated with electoral period.
This is a study carried out by the consultancy Claves Información Competitiva, called “Study of the Argentine consumer financing market”. As stated in the document, business competitiveness does not have much space in the current context and therefore the wage dynamism will continue to be limited and will have a negative impact on domestic demand.
In addition, as indicated in the document, the lack of dollars in international reserves leaves no room for growth in domestic spending and wages above inflation and the dollar.
On the other hand, the changes in the market rules of the game by the governmentsuch as the recent regulatory policy on rates and the elevated macroeconomic volatilityalso affect consumption.
However, the methods of consumer finance they are showing a deterioration since 2019increased by the health emergency due to Covid-19.
In relation to the financial dynamics of companies there is some heterogeneity. delinquency is low in general terms and the profitability indexes are comfortable in the banking entities. In financial companies, on the other hand, greater weakness is observed.
Likewise, in the year 2022 there was a strong growth in financing from entities to the Central Bank and the National Treasurydisplacing, in part, credit for the private sector.
Thus, the climate of the sector is moderate and it is seeking to resume the positive dynamics of previous years to improve existing problems.
What types of loans prevail?
Loans for consumption registered a deterioration in recent years, showing a decrease of 40.8% in real terms (deflated by the CPI INDEC) between 2018 and 2022, currently representing 45.6% of total loans to the private sector.
Personal loans showed a 61.9% decline between 2018 and 2022coming to represent 16.5% of total loans in 2022, compared to 27.7% in 2018.
Consumption with credit cards showed a decrease of 16.4% between 2018 and 2022, coming to represent 29% of total loans in 2022, against 22.1% in 2018.
Reasons for the deterioration of the credit supply
According to the report, this dynamic of deterioration of financial system loans and, particularly of consumer credits, was due to various factors.
First of all, to weakness in the level of activity in recent years. According to estimates, the decline in private consumption was 1.4% between 2018 and 2022, affected by growing inflationary pressures and the consequent deterioration in consumer purchasing power that impacted domestic demand.
Secondly, they also had a negative impact on the higher placements that banks make in short-term bills from the public sector (BCRA and the Treasury), seeking to take advantage of the rise in interest rates in a context of exchange rate instability.
In this sense, the holding of public securities of private banks represented 41.2% of total assetsshowing a strong increase in relation to 2018 (22.4%)
Third, it should be noted that the increasing regulation of lending ratessuch as credit card loans or the Now 12 Program, incentives remain for entities.
Source: Ambito
