The financial conditions of the Argentine economy worsened in March for the second consecutive month, due to both internal and external factors.
This is clear from the Financial Conditions Index (ICF) published monthly by the Argentine Institute of Finance Executives (IAEF). According to that report, the ICF fell in March for the second consecutive month from -85.8 to -110.8, returning to the level it had last December.
The monthly loss of 25 points was the most abrupt since July of last year, when local conditions caused the ICF to skid: on this occasion the decrease in the indicator “was the fault of both Argentine conditions and international variables, almost in equal parts“, the IAEF noted.
The local conditions subindex was located at -119.45 points, a fall of more than 11 points compared to the 108.1 in February and, with this value, the local ICF returns to November levels, but is still more than ten points better than in October 2022, which was the bottom of last year and the worst record since the series since 2005.
The local component of the ICF has been negative since August 2019 without interruption and has been in a “stress” zone for 44 months in a row.
Nine of the ten components fell in March while only one improved in the month-on-month comparison: it was core inflation.
The worst falls were registered with the expected depreciation and country risk, since sovereign bonds sank after the Government announced that it could sell the titles held by State organizations.
For its part, the external conditions sub-index marked its third consecutive month in positive territory and it was also verified that nine of the ten components that comprise it fell: the variable that reflects emerging currencies was the only one that fell in March 2023.
The biggest loss came from the financial component of the S&P 500 as the failure of Silicon Valley Bank and doubts about numerous regional banks put stress on the US financial system. Global liquidity was another of the variables that suffered strongly last March.
According to the IAEF, the world “begins to show a much more difficult place. Problems with banks in the United States and Switzerland, geopolitical issues from the situation between China and Taiwan make the international situation quite hostile, including the risk of recession in several countries”.
“Although today Argentina is not very financially connected to the world, it is necessary to have access to the debt market for the public sector in 2025 if it is to avoid a new debt restructuring”warned the business entity.
In addition, he considered that the cost of that debt “will be much higher than what most emerging countries have achieved in the last two years.”
Source: Ambito
