Executive summary
During the last quarter of the year, the Argentine economy entered a recovery phase, after five quarters of decline in the level of activity. The dynamism of the economy was mainly driven by more favorable external conditions.
The capital market performed positively in an environment of low liquidity. Sovereign risk and the perception of foreign exchange risk decreased and an improvement was observed in the quotations of securities and shares.
The financial system had to confront two events – the presidential elections of mid-October and the so-called year 2000 effect – which introduced uncertainty about the normal evolution of monetary and financial variables. However, the fears associated with these uncertainty factors proved to be excessive. The political transition was carried out in an orderly manner, the international reserves of the financial system grew steadily, and the monetary variables did not show significant movements. Although the year 2000 effect affected deposits, it did so in a proportion far from what could be considered critical.
With respect to the financial institutions as a whole, it is noted that their level of intermediation did not grow in the quarter, while there was a significant application of resources from the decrease in the holding of liquid assets and an increase in external credit to public sector financing and the cancellation of deposits. Quarterly profitability suffered due to higher charges for uncollectibility and administrative expenses, completing a year with a significantly lower return than those observed in previous periods. Portfolio quality and credit risk exposure both improved in the fourth quarter. Finally, the solvency degree remained unchanged in this period, remaining well above the present in the main emerging economies and international standards.
