USD/ARS will be at 48 by December - BBVA

Analysts at BBVA Research expect Argentinean GDP to fall 1.2% in 2019, and see it growing quarterly form 2Q-19 due to the recovery of agricultural campaign and the reduction of FX market tensions. They see the US Dollar rising to 48 (USD/ARS) by year-end. 

Key Quotes: 

“The polarization of the political scene is increasing. The announcements of moderate candidates in the two tickets with "real" chances of winning the elections were well received by the markets. Our baseline scenario assumes that the current economic policies will continue after the elections.”

“The FX market stability achieved with the new FX reference zone scheme and the maintenance of monetary tightening moderated inflation expectations. We maintain the inflation rate forecast of 40% for 2019 and 30% for 2020.”

“The exchange rate for December 2019 will be at ARS/USD 48, reaching ARS/USD 60 by the end of 2020 which will prevent an excessive loss of competitiveness."

"There is evidence of a strong adjustment in the current account that will go from -5.1% of GDP (2018) to -2.3% of GDP this year.”

“The trade surplus and a lower deficit in Tourism will be offset by the impact of interest payments (4% of GDP) due to higher indebtedness. The situation will remain almost unchanged in 2020.”