While global investors have displayed some enthusiasm for Argentine assets following Macri’s election, there are economic issues to consider. For example, per capita GDP growth in recent years has been scant. Additionally, Argentina’s domestic credit-to-GDP is well below the regional average while its consumer debt ratio is high.
Some market observers are concerned that Argentina’s economy could be pinched as the new president implements tough measures, such as cuts to the budget and devaluation of the peso, that could further weigh on consumers. Oxford Economics projects gross domestic product could contract over the next two years before returning to growth of more than 5% by 2019.
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“The next important challenge for the administration, in our view, is the reduction of a colossal primary deficit in the fiscal accounts left by the previous government. However, the stance adopted on fiscal issues is lax, which creates doubts about the future of the economy, particularly in relation to disinflation and growth sustainability,” according to the S&P note posted by Barron’s.
Global X MSCI Argentina ETF
