1. Executive Summary
In February, the Monetary Base registered a nominal contraction between balances at the end of the month by $0.4 trillion. The contraction factors were operations with the National Treasury and BOPREAL tenders, which were partially offset by the rest of the factors. It should be noted that the placement of BOPREAL also shrinks the M3. In terms of Output, a decrease was observed in the BCRA’s monetary liabilities, both remunerated and non-remunerated.
As for the secondary creation of money, in the month there was a nominal expansion of credit, although it only allowed the level of financing to the private sector to stabilize practically at the same level as in January. Current account advances boosted bank financing and were offset by decreases in the rest of the lines.
Regarding the demand for money, the broad monetary aggregate, private M3, registered a monthly expansion of $1.3 trillion. However, at constant prices and without seasonality, this implied a contraction of 7.1% per month, which was mainly explained by the dynamics of interest-bearing demand deposits. In terms of GDP, all components of broad money registered a monthly fall.
Finally, International Reserves experienced a decrease in the month. This dynamic was explained by the payments to international organizations, a more accentuated fall in minimum cash accounts on the last day of the month (which was reversed the following day) and, to a lesser extent, the valuation effect of exchange rates crossed with other currencies. These effects were offset by the positive balance left by foreign currency purchases from the private sector.
2. Money Supply
2.1. Primary Supply
The Monetary Base in February registered a contraction between balances at the end of the month of $0.4 trillion, with the repurchase of public securities in the BCRA’s portfolio and the subscription of BOPREAL as the main factors of contraction.
Among the supply factors of the Monetary Base, purchases of foreign currency from the private sector led to an expansion of $2.0 trillion, which was partly offset by sales to the public sector (-$0.9 trillion). Monetary financing to the National Treasury was negative in the month. The repurchase of securities by the National Treasury implied a contraction of $4.3 trillion that was partially offset by the operations with public securities by the BCRA that gave rise to an expansion of $1.9 trillion. On the other hand, the National Treasury used funds that were in its current account at the BCRA, which implied an expansion of $0.7 trillion. Liabilities remunerated in pesos generated an expansive effect in the month of about $4.1 billion considering variation of balances and interest, to which $0.5 billion was added by LEDIV. The dismantling of these instruments was fundamentally linked to the funding in pesos of the primary subscription of public securities and BOPREAL by importers. In effect, the placement of the BOPREALs implied a contraction of the Monetary Base by $4.4 trillion, so that the total effect of remunerated liabilities was expansive by $0.2 trillion (see Figure 2.1.1). With respect to BOPREAL, it should be noted that in February the award of Series 2 was completed and the tender for Series 3 began in March, with USD 792 million having been subscribed as of the date of publication of this report.
In real terms and adjusted for inflation, the average monthly variation of the Monetary Base in February was -6.3%, giving rise to a year-on-year contraction of 49%. As a Product ratio, it stood at 2.6% in the second month of the year, which implied a decrease of 0.4 p.p. compared to January. Finally, interest-bearing liabilities ended the month with an average balance of 8.6% of GDP, which implied a reduction of 0.6 p.p., and accumulate a fall of 1.1 p.p. so far this year (see Chart 2.1.2).
Figure 2.1.1 | | Factors of variation of the Monetary Base
(var. balances at the end of the month)
Figure 2.1.2 | Monetary Liabilities as % of GDP
2.2. Secondary offer
Loans in pesos to the private sector presented an average monthly expansion of approximately $1.8 trillion in February, which implied that at constant prices and without seasonality their value was slightly above the previous month’s record, after three consecutive months of declines. The improvement in the performance of bank financing to the private sector was explained by current account advances, while the rest of the components contributed negatively to the monthly variation. In year-on-year terms, loans registered a real fall of 38%, while as a Product ratio they stand at 4.4%, a minimum record compared to the values of recent years. The low level of bank financing is mainly explained by the process of financial disintermediation experienced in recent years.
Figure 2.2.1 | Contribution to the monthly growth of loans in pesos to the private
sector (at constant prices and without seasonality)
Figure 2.2.2 | Loans to private sector as % of GDP
Interest rates on loans remained broadly unchanged in the month, in a context in which the reference rate remained unchanged. However, there was a decrease in the interest rate on personal loans, linked to a punctual and transitory fall that was reversed in the first days of March.
3. Demand for money
The broad monetary aggregate, private M31, registered an average monthly expansion of $1.3 trillion in the month, which is equivalent to a contraction of 7.1% per month at constant prices and adjusted for seasonality. In the year-on-year comparison, this aggregate would have registered a decrease of 42.8% and as a percentage of GDP it would have stood at 11.6%, 1.7 p.p. below the previous month’s record and 2.3 p.p. lower than last December’s record.
At the component level, the decrease in private M3 was mainly explained by the fall observed in interest-bearing demand deposits of Money Market Mutual Funds (MM FCI, see Figure 3.1). The contraction in the holdings of FCI’s interest-bearing demand deposits of MM was explained by the real fall in the assets of these agents (-6.8% monthly) and by the decision of the portfolio to rotate towards term instruments with an early cancellation option. The higher holdings of fixed-term deposits of MM FCIs were partially offset by a fall in the holdings of the rest of the agents, which led this type of instrument to register an expansion of 2.2% at constant prices and without seasonality. In terms of Output, all components registered a contraction in the month under analysis (see Figure 3.2).
Figure 3.1 | Contribution to var. mens. of the private
M3 (at constant prices and without seasonality)
Figure 3.2 | Monetary Aggregates as % of GDP
4. Foreign currency
In the foreign currency segment, the main assets and liabilities of financial institutions registered disparate behaviors. On the one hand, private sector deposits showed an increase of USD454 million between balances at the end of the month and ended February with a balance of USD16,416 million. On the other hand, loans to the private sector registered a drop of close to USD60 million, with a balance at the end of the month of USD3,772 million.
The BCRA’s International Reserves ended February with a balance of USD26,690 million, registering a fall of USD951 million compared to the end of January (see Figure 4.1). This dynamic was impacted by payments to international organizations. In particular, in February, a payment was made to the IMF for USD776.1 million (interest maturity under the Extended Facilities Agreement) and the CAF loan that had been granted in December for USD966.4 million was canceled at the beginning of the month. The fall in minimum cash accounts also contributed to the decline, with a particular incidence on the last day of the month, which was reversed the following day, and to a lesser extent the exchange differences. These effects were partially offset by the purchase and sale of foreign currency in the Free Exchange Market (MLC) for about USD2,360 million.
The BCRA maintained the crawling peg of 2% per month of the bilateral nominal exchange rate (TCN) against the US dollar, remaining at $842.25/USD at the end of the month. The Multilateral Real Exchange Rate Index (ITCRM) was 8.3% higher at the end of 2015 and 19% above the average figure for 2016-17 (see Figure 4.2).
Figure 4.1 | Factors of change in gross
reserves (change between balances at the end of the month)
Figure 4.2 | Multilateral Real Exchange Rate Index (ITCRM)
Glossary
ANSES: National Social Security Administration.
AFIP: Federal Administration of Public Revenues.
BADLAR: Interest rate on fixed-term deposits for amounts greater than one million pesos and a term of 30 to 35 days.
BCRA: Central Bank of the Argentine Republic.
BM: Monetary Base, includes monetary circulation plus deposits in pesos in current account at the BCRA.
CC BCRA: Current account deposits at the BCRA.
CER: Reference Stabilization Coefficient.
NVC: National Securities Commission.
SDR: Special Drawing Rights.
EFNB: Non-Banking Financial Institutions.
EM: Minimum Cash.
FCI: Common Investment Fund.
A.I.: Year-on-year .
IAMC: Argentine Institute of Capital Markets
CPI: Consumer Price Index.
ITCNM: Multilateral Nominal Exchange Rate Index
ITCRM: Multilateral Real Exchange Rate Index
LEBAC: Central Bank bills.
LELIQ: Liquidity Bills of the BCRA.
LFIP: Financing Line for Productive Investment.
M2 Total: Means of payment, which includes working capital held by the public, cancelling cheques in pesos and demand deposits in pesos from the public and non-financial private sector.
Private M2: Means of payment, includes working capital held by the public, cancelling cheques in pesos and demand deposits in pesos from the non-financial private sector.
Private transactional M2: Means of payment, includes working capital held by the public, cancelling cheques in pesos and non-remunerated demand deposits in pesos from the non-financial private sector.
M3 Total: Broad aggregate in pesos, includes the current currency held by the public, cancelling checks in pesos and the total deposits in pesos of the public and non-financial private sector.
Private M3: Broad aggregate in pesos, includes the working capital held by the public, cancelling checks in pesos and the total deposits in pesos of the non-financial private sector.
MERVAL: Buenos Aires Stock Market.
MM: Money Market.
N.A.: Annual nominal.
E.A.: Effective Annual.
NOCOM: Cash Clearing Notes.
ON: Negotiable Obligation.
GDP: Gross Domestic Product.
P.B.: basis points.
PSP.: Payment Service Provider.
p.p.: percentage points.
MSMEs: Micro, Small and Medium Enterprises.
ROFEX: Rosario Term Market.
S.E.: No seasonality
SISCEN: Centralized System of Information Requirements of the BCRA.
SIMPES: Comprehensive System for Monitoring Payments of Services Abroad.
TCN: Nominal Exchange Rate
IRR: Internal Rate of Return.
TM20: Interest rate on fixed-term deposits for amounts greater than 20 million pesos and a term of 30 to 35 days.
TNA: Annual Nominal Rate.
UVA: Unit of Purchasing Value
References
1 The private M3 includes the working capital held by the public and the deposits in pesos of the non-financial private sector (demand, time and others).
Compartir en
