Capital Controls Will Persist Amid Lack of Investment Into Argentina

• Fitch Solutions forecasts that Argentina will post a current account deficit of 0.7% of GDP in 2021 and 1.5% in 2022 (from a surplus of 0.9% in 2020), narrow shortfalls relative to recent years as multi-year high soybean prices support export earnings. 
• The country posted a rare current account surplus (0.9% of GDP) in 2020, as a deep recession curtailed imports, while exports fell less significantly. Though Argentina's economic recovery remains highly volatile and incomplete, domestic activity has nonetheless bottomed out and with it import demand is rapidly rebounding, pulling the overall balance back into deficit. 
• Although Argentina's external financing needs will be modest over the coming quarters, the country is likely to see limited foreign investment given a lack of confidence in policy direction. 
• As a result, Fitch anticipates that the stability of Argentina's external accounts over the coming quarters will depend on the maintenance of capital controls and an eventual agreement to delay repayments to the IMF.

(Source: Fitch Solutions)