November 26, 2014
BCRA sees reserves rising
Central Bank forecasts lesser inflation, money-printing
The Central Bank’s (BCRA) forecast for the economic year ahead is far more optimistic than that of most private consultancies, including less inflation, GDP growth, abundant credits and investment, curbed money-printing and higher levels of foreign reserves.
In an annual report titled Objectives and plans regarding the development of monetary, financial, credit and exchange policies for the year 2014, the BCRA emphasized the upside of losing US$11 billion in reserves in 2013: “having continued to show indicators of solvency,” arguably seeking to counteract perceived pessimism in private forecasts, with their implied effects on citizens.
Confidence of private sector growth, at least in financing, is based partly on the growth last year of the leverage ratio — the ratio between total assets and net worth — which ended October at 8.6.
The monetary institution said that exchange rate controls will be upheld this year, but that regulatory modifications are in the works in order to guarantee financial entities with “adequate levels of liquidity, creditworthiness and security in the face of the risk implied by the activity.”
A point of convergence with private consultancies is seen in the forecast of international economic growth, set at 3.2 percent, up 0.8 percent with the estimate for 2013.
Employment is foreseen to remain at levels similar to that registered at the end of the third quarter last year: 6.8 percent, while the greatest risks are seen coming from abroad. Austerity policies in other countries and their effect on employment are seen as potential headaches.
Decreased monetary stimulus from the United States’ Federal Reserve may lead the dollar to appreciate, which could lead to increased pressure on the Brazilian real — the currency of Argentina’s main trading partner currency depreciated 10 percent against the dollar in 2013.
Slightly higher trade surplus
Exports are once again expected to be driven by soy — which ended 2013 at an average US$520 per ton — although international demand is expected to increase by 6.3 percent, bringing prices down by eight percent to an estimated average value of US$476 per ton in 2014.
Soy will top the list with a total harvest of 109.6 million tons for the farming sector, while the overall surplus from trade is expected to weigh in at US$10 billion, with US$94 billion in exports. The trade surplus in 2013 was estimated at US$9 billion.
Despite the BCRA considering that economic growth will make imports more dynamic, the institution will seek to oversee a turnaround in a growing energy sector, which rose to US$6146 billion in November. The bank thus recognized that the problematic sector drove the surplus down from November.
According to the BCRA, inflation will drop due to credit policies to expand supply due to higher demand, lower international prices for primary goods and price accords.
The BCRA does not provide a specific figure, however, and the discrepancy between government and private estimations looks likely to continue.
Herald with Télam