Business Monitor International


Argentina Business Forecast Report

Published 16 December 2014 | Quarterly

  • 53 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
 
$1,195.00
Argentina Business Forecast Report

Core Views

  • Tepid private consumption and a weaker net exports position will weigh on Argentine real GDP growth in 2015. A negotiated settlement allowing for the resumption of coupon payments on sovereign bonds in early 2015 will improve investor sentiment somewhat, but a substantial uptick in investment is unlikely while the current administration remains in power.

  • Pre-election spending and rising interest payments will see Argentina's primary and nominal budget deficits widen in 2015. The Argentine government will tap its foreign reserves in order to finance the budget shortfall, exacerbating the country's weak external account position.

  • The Argentine government will allow the peso to depreciate over the coming months, as a drop in foreign currency reserves keeps downwards pressure on the exchange rate. We expect a more substantial devaluation to occur after the October 2015 presidential election, as political pressure will preclude a major currency adjustment ahead of the poll.

Key Forecast Changes

  • We revised down our 2016 exchange rate forecast, as we believe that an easing of capital controls under a newly-elected government will drive a sharp depreciation in the peso.

Key Risks To Outlook

  • The risks to our 2015 fiscal forecasts are weighted to the downside. Should Argentina's economic recession continue into next year, revenue growth could come in below our expectations, leading to a wider fiscal deficit. Weaker real GDP growth would likely be a result of the government failing to reach a settlement with holdout debt investors, which would weigh heavily on investor sentiment. This would offset the fact that Argentine expenditures would be lower in the absence of interest payments. 

  • The risks to our balance of payments forecasts for Argentina are weighted to the downside. Weak economic growth in key trade partners such as Brazil could weigh on Argentine export growth more than our forecasts currently anticipate. Moreover, soy prices could...

Table of Contents

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic/Short-Term Politics
8
Local Election Result A Blow To FPV
8
A deteriorating economy, rising crime and a lingering debt standoff will weigh on political support for the ruling Frente Para la Victoria
A deteriorating economy, rising crime and a lingering debt standoff will weigh on political support for the ruling Frente Para la Victoria
(FPV) ahead of Argentina's next presidential election in October 2015
A poor showing by the FPV in a recent local election has
reinforced this view
Tab le: POLITICAL OVERVIEW
8
Long-Term Political Outlook
9
Economic Reforms Key To Political Stability
9
Argentina scores above the Latin American average in our Long-Term Political Risk Index, but continued stability hinges on the
Argentina scores above the Latin American average in our Long-Term Political Risk Index, but continued stability hinges on the
government's ongoing policy pivot towards m ore market -friendly policies
While the October 2015 general election is set to usher in a
more reform-minded government, we highlight several risks that could threaten the country's multiyear political outlook
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
Growth To Remain Hamstrung By Weak Consumption And Investment
14
Tepid private consumption and a weaker net exports position will weigh on Argentine real GDP growth in 2015
A negotiated settlement
allowing for the resumption of coupon payments on sovereign bonds in early 2015 will improve investor sentiment somewhat, but a
allowing for the resumption of coupon payments on sovereign bonds in early 2015 will improve investor sentiment somewhat, but a
substantial uptick in investment is unlikely while the current administration remains in power
Tab le: Eco nomic Activit y
14
Exchange Rate Policy
16
ARS: Drop In Reserves To Drive FX Weakness
16
The Argentine government will allow the peso to depreciate over the coming months, as a drop in foreign currency reserves keeps
The Argentine government will allow the peso to depreciate over the coming months, as a drop in foreign currency reserves keeps
downwards pressure on the exchange rate
We expect a more substantial devaluation to occur after the October 2015 presidential
election, as political pressure will preclude a major currency adjustment ahead of the poll
Table: Exchange Rate
16
Table: CURRENCY FORECAST
16
Balance Of Payments
18
Wider Trade Surplus Will Not Prevent Drop In Reserves
18
A rebound in soy bean prices will drive a modest widening of Argentina's goods trade surplus in 2015, leading to a narrower current
A rebound in soy bean prices will drive a modest widening of Argentina's goods trade surplus in 2015, leading to a narrower current
account deficit
However, rising interest payments on external debt will see foreign currency reserves continue to fall, underpinning our
view that another peso devaluation will occur after the October 2015 presidential election
Table: Current Account
18
Fiscal Policy
20
Interest Payments And Pre-Election Spending To Drive Wider Shortfall
20
Pre-election spending and rising interest payments will see Argentina's primary and nomina l budget deficits widen in 2015
The
Argentine government will tap its foreign reserves in order to finance the budget shortfall, exacerbating the country's weak external
Argentine government will tap its foreign reserves in order to finance the budget shortfall, exacerbating the country's weak external
account position
Table: Fiscal Policy
20
Chapter 3: 10-Year Forecast
23
The Argentine Economy To 2023
23
Energy Sector To Bolster Long-Term Growth
23
Argentina-s real GDP growth will remain weak over the next five years, amid a gradual reversal of the interventionist policies of
Argentina-s real GDP growth will remain weak over the next five years, amid a gradual reversal of the interventionist policies of
President Cristina Fern-ndez de Kirchner
Growth will accelerate during the second half of our 10-year forecast, driven by rising natural
gas production and stronger inbound investment as the policy e nvironment continues to evolve in a more business-friendly direction
Table: Long-Term Macroeconomic Forecasts
23
Chapter 4: Operational Risk
27
SWOT Analysis
27
Operational Risk Index
27
Operational Risk
28
Table: Operational Risk Index
28
Transport Network
29
Table: Latin America Transport Network Risks
30
Economic Openness
34
Table: Latin America - Economic Openness Risk
34
Table: Export By Product, 2007-2013
35
Chapter 5: Key Sectors
37
Infrastructure
37
Table: Construction And Infrastructure Industry Data
38
Table: Construction And Infrastructure Industry Data
39
Oil & Gas
41
Table: Oil Production
42
Table: Oil Production
42
Table: Gas Production
43
Table: Gas Production
43
Other Key Sectors
45
Table: Pharma Sector Key Indicators
45
Table: Telecoms Sector Key Indicators
45
Table: Defence and Security Sector Key Indicators
45
Table: Food and Drink Sector Key Indicators
46
Table: Autos Sector Key Indicators
46
Table: Freight Key Indicators
46
Chapter 6: BMI Global Assumptions
47
Global Outlook
47
Warning Signs Growing
47
Table: Global Assumptions
47
Table: Develop ed Stat es, Real GDP Growth, %
48
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
48
Table: Emergi ng Markets , Real GDP Growth , %
49

The Argentina Business Forecast Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Argentina and is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Argentina's economic, political and financial prospects through end-2018, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of Argentina's economic and industry growth through end-2018.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Argentina's country risks against regional peers using BMI's country comparative Risk Rankings system.
  • Evaluate external threats to doing business in Argentina, including currency volatility, the commodity price boom and protectionist policies.

The Argentina Business Forecast Report by Business Monitor International (BMI) includes four major sections: Economic Outlook, Political Outlook, Business Environment and Key Sector Outlook.

Economic Outlook:

How will the Argentina economic policy-making and performance impact on corporate profitability over 2014-2018?

BMI provides our fully independent 5-year forecasts for Argentina through end-2018 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Argentina Business Forecast Report features BMI's forecasts with supporting analysis for 2014 through to end-2018, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Rankings system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector exposure).
  • Global Assumptions - forecasts for each year to end-2018 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Argentina and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Argentina, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Argentina over the next 5-years?

BMI's Argentina country Risk Rankings evaluate the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Argentina Market - Political Strengths, Weaknesses, Opportunities and Threats facing Argentina.
  • Political Stability and Risk Assessment - BMI's Risk Rankings assess explicit short- and long-term risks to political stability; latest ankings, rankings and trends for Argentina's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.

Key Benefits

  • Benchmark Argentina's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Business Environment

Business Environment Risk Rankings with SWOT Analysis - Business Environment Risk Rankings for Argentina, benchmarked against rankings for regional neighbours.

Country Competitiveness - Competitiveness of Argentina's business operating environment in supporting corporate growth and profitability, compared with regional neighbours.

Business Environment Contents

  • Domestic Environment - Transparency, cronyism and corruption; labour market flexibility; corporate tax burden; interest rate levels; sophistication of banking sector and stock market; levels of business confidence; infrastructure and IT.
  • Foreign Direct Investment - Analysis of foreign investment regime; foreign ownership laws; attractiveness of business environment to foreign investors.
  • Foreign Trade - Analysis of trading environment, government trade policy, liberalisation measures, tariffs and membership of trade areas.

Key Benefits

  • Assess your company's evolving exposure to country specific operational and business risks, using BMI's in-depth analysis of the legal and regulatory business environment.
  • Understand your market's comparative strengths and weaknesses in the key areas of commercial infrastructure and business institutions, using BMI's proprietary global Business Environment Risk Rankings.

Key Sector Outlook

Which industry sectors in Argentina will grow fastest, and where are the major investment opportunities in the market?

BMI's identifies investment opportunities in Argentina's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry with developments over 2009-2013, covering major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2014-2018, using BMI's proprietary industry modeling technique, which incorporates all key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across, and within, each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express