The macroeconomy is entering into a new normal, a mediocre status quo with low growth, restricted by lack of imports and higher inflation but leaving the explosive path. We still believe that in 2021 the economy will muddle though an unstable equilibrium, with a stronger grip on official FX and a monetary balance on the tipping poing of explosive dynamics.

Should this be enough to avoid another Balance of Payment crisis depend on whether luck tilts to the positive side no every risk source (mostrly COVID, Soybeans, political expenditure and global winds).

Growth in Q4 was higher than expected (about 3.0% QoQ vs expected 1.5%)

Higher growth aws driven by services recovery and positive industrial production and construction. On a month over month basis, November was the peak of the quarter, with mixed signals in December.

We now estimate -10% in 2020 (with 5.0% of statistical carryover), -5.0% YoY in dec 2020, and 7.0% in 2020 (3.0 dec 2021 YoY).

Recovery was strong in Services, in line with softer COVID restrictions

Inflation in December >= 4.0% (3.7% av in q4:2020) driven by the bovine meat shock and faster FX depreciation, Higher inflation triggered heterodox responses. Tariff hikes are no longer being discussed, corn exports were forbidden for a couple of days and price controls are again on agenda. Bread for today, hunger for tomorrow. January began with lower printing. We expect 51% av (3.5% monthly av) and 47% yearly average.

Commodity prices climbed another step. Positive export incidence in the range USD 7/12bn even with production adjusting 10% from current forecast

On the positive side, export seassonality in 2020 was very atypical because the agro market anticipated its sales in 2019. 2020/2021 campaign should not see that effect.

Imports are booming, and the Central Bank is already tightening the grip on them. Service Imports are still abnormally low

Spot depreciation is acelerating, and new nominal normal is around 3/4%

We believe the Central Bank will micromanage the FX market, tightening and loosening FX access in response to USD short term supply.

The new monetary normal. Fx Purchases will add to the monetary overhang

Sources of money supply:
3.9 from Treasury
3.1 from cuasifiscal deficit
1.1 from reserves purchases

With 50% inflation and 7% growth:
Segniorage on cash: 2.9%
Segniorage on Leliqs: 3.5%
New Debt: 1.8%


Assets on banks portolios = 70%

Monetary Dynamics are on the tipping point on being unstable

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Financial Program, Money Supply & Sources of Sterilization

In our base-case scenario, public assets grow to 70% of private deposits