The index seeks to summarize the state of financial conditions in argentina to more easily identify how they influence the levels of financial and economic activity. It seeks to reflect the availability and cost of financing for the government, provinces, companies and families.
Local conditions had a marginal drop compared to the August record, although they are in negative territory since March 2019 and accumulate 43 months in the stress zone (below 0). Only 4 of the 10 components worsened in September: depreciation, interest rate rise, deposits in dollars and country risk. On the positive side, the component that contributed the most was the smallest drop in currency gap versus last month. Inflation is also expected to fall at the margin and long-term liquidity has increased, which is good for the index, but not for the economy because it speaks to the weakness of the credit market.
The external conditions sub-index fell from 9.8 in the previous month. 8 of the 10 components worsened in September. Only confidence in banks and global liquidity prevented the fall. The worst fall was that of US stocks and the volatility of raw materials.
Usually, the Argentine economy grew when financial conditions remained in the comfort zone for an extended period of time. However, they point from the IAEF and Ecoviews that “the world is beginning to show a much more hostile place. And although today Argentina is not very financially connected, 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. They add that if they want to renegotiate a debt to future, will pay much more expensive that currently accessed by emerging markets.
“To this are added discussions about the ability of state borrowing in local currency, which adds volatility and uncertainty. More in the short term, the deterioration of local conditions predicts difficult months, although it is also fair to say that the state’s financial problems have become an opportunity for companies seeking money, since players in the local financial system are now seeking increase risk in the private sector and lower risk in the public sector,” they add.
Source: Ambito
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