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JP Morgan praised Javier Milei’s fiscal surplus but detailed that he needs to pass laws in Congress and lift the stocks

JP Morgan praised Javier Milei’s fiscal surplus but detailed that he needs to pass laws in Congress and lift the stocks

He JP Morgan bank In a report he said that “the Government is applying cpositive changesbut the execution is the risk”. In the short term, they indicated the approval of the Bases Law and the Fiscal Package is “very important for market confidence in the government of Javier Milei, since it would allow a sustainable fiscal adjustment backed by popular support“.

The report LatAm Equity Strategy revealed that “in the medium term, The most important event to regain market confidence is the removal of capital controls, the liberalization of currencies and the liberalization of the exchange regime“.

“Although the Argentine authorities have been very explicit about this objective, it is still not clear when the necessary conditions for this will be met,” they highlighted, also expressing that if these restrictions were lifted, it would be “the first step for MSCI to potentially review Argentina in the country classification and its possible return to the Emerging Market category.”

Argentina was removed from MSCI LatAm on November 30, 2021. “We have no exposure, but our preferred sector in the country remains oil and gas; due to the risk situation, our analysts raised both YPF and Pampa to Neutral” they said and detailed: “Within the non-index values, we are Overweight in Mercado Libre, Arcos Dorados and Globant.”

The delays in finalizing a stabilization plan

For JP Morgan, the scenario in which restrictions will be lifted, “It could take one or two years to materialize, depending on the experience under the Macri government”. “We continue to see a challenging operating environment for companies in Argentina, especially due to currency devaluations, lower consumption and lower fiscal stimulus,” they expanded.

“After the failed attempt at the first Omnibus Law, the government is making more efforts to dialogue and advance in this second attempt, It will be key to monitor future negotiations, since beyond the details of the reform, the market is focused on the government’s ability to approve reforms in Congress“, they said about libertarian laws.

“The approval of The Base Law and Fiscal Package would demonstrate Milei support and capacity to implement its agenda, while addressing macroeconomic imbalances“, they indicated.

Economic indicators: inflation and fiscal deficit

From the important bank they highlighted that “the Government has managed to maintain the primary surplus for four consecutive months” and that “fiscal consolidation remains on track, with an annual primary surplus of 0.7% of GDP, compared to the deficit of -0.9% of GDP registered in the first four months of 2023”

On the negative side, they indicated, “Economic activity has contracted every month since September last year due to these adjustments. The Government is implementing positive changes, but execution risk is the key factor to monitor.”

Source: Ambito

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