Argentina 2H26: Bolstering shields for the 2027 test

Research evidence excerpt

Argentina 2H26: Bolstering shields for the 2027 test

e

be desirable to strengthen reserves buffers ahead of election-

5).

year volatility in 2027. Overall, our base case envisages a bal-

anced current account in 2026, and US$9.7bn in financial

Figure 5: Credit evolution

inflows, resulting in reserves accumulation of around lvl, Dec 2017 = 100

US$9.5bn. 160

140 ARS credit (real terms) USD credit

Despite a sharp decline in sovereign risk, the administration 100

has maintained a cautious approach to market access. EMBI 80

spreads narrowed to around 420bp from 561bp, reflecting 60

improved macro fundamentals and stronger reserve accumu- 40 20

lation. Even so, the government has refrained from issuing 0

externally, citing financial costs that remain above perceived Jan-05 Jan-08 Jan-11 Jan-14 Jan-17 Jan-20 Jan-23 Jan-26

Source: BCRA and J.P. Morgan

fundamentals. While sovereign ratings have been upgraded,

the administration has instead pursued guarantees from multi- While private consumption expanded in the first quarter,

lateral institutions, aiming to secure around US$4bn in investment continued to contract. Revised seasonally adjusted

financing from international banks in the third quarter. data show four consecutive quarterly declines, leaving invest-

ment 1.3% below its 1Q25 peak. This contrasts with house-

The first half of the year: What deviated and hold consumption, which has risen 3.5% over the same period

why (Figure 6).

The main deviation from our initial baseline came from infla-

Figure 6: Consumption and investment

tion, particularly during the first quarter. By May, headline lvl, sa , Mar 2004=100 COVID-19

CPI slowed to 2.1% m/m, down from an average of 3.0% Sudden stop 2023 Election

210through April. Core inflation also fell below 2% m/m, reach-