1. Executive Summary
The BCRA kept the benchmark interest rates unchanged throughout June. In particular, the monetary policy interest rate (LELIQ 28 days) remained at 97% n.a. (154.9% y.a.) and in real terms remained balanced with respect to both observed and expected inflation, which contributes to financial and exchange rate stability.
Transactional means of payment continued to contract at constant prices. Thus, transactional private M2 in terms of GDP continued to be at the lowest levels in the last 20 years. At the level of its components, this behavior was more marked in the case of working capital held by the public, which reached a new minimum in terms of Output. With regard to interest-bearing instruments, at constant prices, fixed-term placements in pesos by the private sector registered a slight contraction in June, although they persist around the highest values of recent decades in terms of Output. In this context, the broad monetary aggregate (private M3) at constant prices and without seasonality would have registered a contraction in the sixth month of the year and stood at 17.3% of GDP.
In relation to bank credit assistance, despite the boost of the Financing Line for Productive Investment (LFIP), loans in pesos to the private sector showed a fall in the month, which was generalized at the level of the large lines of credit.
Finally, the International Reserves continued to reflect the low dynamism of the foreign exchange market in a context of record drought, to which was added, on the last day of the month, the impact of the payment to the IMF for US$2,680 million, integrated with SDRs and yuan from the currency swap agreement with the People’s Bank of China.
2. Payment methods
Means of payment (private transactional M21), in real and seasonally adjusted terms (s.e.), would have registered a contraction of 1.9% in June, and thus accumulate a fall of around 10% in the year. This dynamic was due to the behavior of working capital held by the public, while non-interest-bearing demand deposits remained relatively stable (see Figure 2.1). In the year-on-year comparison, and at constant prices, the transactional private M2 would be 19% below the level of June 2022.
As a ratio of Output, means of payment would have stood at 7.6%, showing a decrease (0.2 p.p.) compared to the previous month and around their lowest values of the last 20 years (see Graph 2.2). In particular, the working capital held by the public reached a new all-time low, while demand deposits are, in terms of GDP, slightly above the minimum values reached at the end of 2019.
Figure 2.1 | Private transactional M2 at constant
prices Contribution by component to the monthly vari. s.e.
Figure 2.2 | Private transactional M2
3. Savings instruments in pesos
The Board of Directors of the BCRA decided to keep the minimum guaranteed interest rates on fixed-term deposits unchanged in the sixth month of year2. The decision was made considering that the real return on investments in local currency is in positive territory with respect to both observed and expected inflation, which contributes to financial and exchange rate stability. Thus, the minimum guaranteed interest rate for placements by individuals remained at 97% n.a. (154.3% e.a.), while for the rest of the depositors in the financial system the minimum guaranteed interest rate persisted at 90% n.a. (138.3% e.a.)3.
Fixed-term deposits in pesos of the private sector would have registered a contraction of 0.7% s.e. at constant prices in June. However, these placements remained around the highest levels in recent decades. In the same sense, as a percentage of GDP, these deposits would have stood at 7.6% in June (0.1 p.p. less than in May), a value similar to the maximum reached at the beginning of the pandemic.
Analyzing the evolution of time placements by strata of amount, it can be seen that the monthly contraction was concentrated in deposits of up to $20 million and was more marked in the retail segment (less than $1 million; see Figure 3.1). Meanwhile, the wholesale segment (more than $20 million) remained relatively stable, with a heterogeneous behavior by type of instrument. In fact, traditional placements grew throughout the month, a dynamic that was more than offset by the fall in investments with an early cancellation option (see Figure 3.2).
Figure 3.1 | Private Sector Deposits in PesosContribution to Real Monthly Growth by Amount Layer
Figure 3.2 | Deposits of more than $20 million
Balance at constant prices by type of instrument
The segment of fixed-term deposits adjustable by CER continued to experience a contraction in real terms, accumulating 11 consecutive months of decline. By type of instrument, traditional and pre-cancellable UVA placements decreased at a similar rate, with monthly rates of change of -5.3% s.e. and -6% s.e., respectively (see Figure 3.3). Distinguishing by type of holder, the decrease was mainly due to the dynamics of placements by individuals, which represent approximately 75% of the total. All in all, the balance of deposits in UVA reached $318,580 million at the end of June, which is equivalent to 2.7% of the total of term instruments denominated in domestic currency.
Figure 3.3 | Fixed-term deposits in UVA of the private
sector Balance at constant prices by type of instrument
Figure 3.4 | Deposits adjustable by exchange
rate Balance at current prices
On the other hand, deposits adjusted for the value of the reference exchange rate experienced a fall in the sixth month of the year, although with a heterogeneous behavior at the level of their components. Demand deposits adjusted for exchange rates experienced an average monthly expansion of 11.7% at constant prices, favored by the carry-over effect of the previous month, reaching a balance of $484,300 million at the end of June. In fact, the variation between balances at the end of the month was -14.7% in real terms, reflecting the use of funds obtained through the sale of dollars through the “Export Increase Program” (PIE). Meanwhile, the DIVA dollar, time deposits, reached a balance of $52,255 million at the end of the month, which implied an average monthly contraction of 3.6% at constant prices (see Chart 3.4).
The broad monetary aggregate, private M3, at constant prices and adjusted for seasonality, would have exhibited a monthly fall of 1.4% in June4. In year-on-year terms, this aggregate would have experienced a decrease of 5.3%. As a percentage of GDP, it would have stood at 17.3%, exhibiting a decrease (0.3 p.p.) compared to last month and remaining in line with the average for the 2010-2019 period.
4. Monetary base
In June, the average of the Monetary Base reached $5,603.8 billion, experiencing a monthly increase of 3.9% ($211,049 million) at current prices. Adjusted for seasonality and at constant prices, it would have exhibited a decrease of 4.7%, with a year-on-year drop of around 33%. As a GDP ratio, the Monetary Base would stand at 3.8%, 0.2 p.p. below the value recorded the previous month and around the lowest values since the exit from convertibility (see Chart 4.1).
Figure 4.1 | Monetary base
Figure 4.2 | Factors explaining the Monetary Base
Average monthly change
On the supply side, the average monthly expansion of the Monetary Base was largely explained by the positive statistical carryover left by the purchases of foreign currency made within the framework of the “Export Increase Program” during May. Another factor in the expansion of liquidity was the BCRA’s operations in the secondary sovereign debt market, aimed at limiting excessive volatility. These factors were partially offset by the dynamics of monetary regulation instruments and public sector operations (see Figure 4.2). Finally, it should be noted that on the last day of the month the National Treasury requested a Transitory Advance for $688,000 million to make the payment to the International Monetary Fund (IMF) scheduled for June 30, in a context where negotiations for the recalibration of the extended facilities program with the multilateral organization led to a delay in the disbursement corresponding to the fifth review of the same. In this way, the funds were destined for the acquisition of foreign currency, which is why this operation would not have a monetary effect.
Regarding the composition of remunerated liabilities, in June the LELIQ with a term of 28 days represented, on average, 71.1% of the total. Longer-term species, mainly concentrated through NOTALIQ, accounted for only 2% of the June balance. On the other hand, 1-day pass-by-passes increased their share of the total number of instruments, reaching a representativeness of 23%. The rest were made up of LEDIV and LEGAR, which increased their participation by 0.6 p.p. compared to May (see Figure 4.3).
Figure 4.3 | Composition of Interest-Bearing Liabilities of the BCRA
Monthly Average
Finally, the BCRA decided to keep its benchmark interest rates unchanged in June considering the slowdown in the inflation rate in May, the evolution of the leading indicators for June and the future outlook for inflation. The interest rate on the 28-day LELIQ remained at 97.0% n.a. (154.9% y.a.), while the interest rate on the 180-day LELIQ remained at 105.5% n.a. (133.8% y.a.). As for shorter-term instruments, the interest rate on 1-day pass-by-passes stands at 91% n.a. (148.2% y.a.); while the interest rate on 1-day active passes stands at 116% n.a. (218.4% y.a.). Finally, the spread of the NOTALIQ was 8.5 p.p. in the last auction, the same value it has registered since September last year.
5. Loans to the private sector
In June, loans in pesos to the private sector in real terms and without seasonality would have registered a monthly contraction of 1.7% and in the last 12 months they would accumulate a fall of the order of 13%. The dynamics of the month were homogeneous by type of financing (see Figure 5.1). As a percentage of GDP, loans in pesos to the private sector fell slightly in the month and stood at 6.4% (see Figure 5.2).
Figure 5.1 | Loans in pesos to the private
sector Real without seasonality; contribution to monthly growth
Figure 5.2 | Loans in pesos to the private
sector In terms of GDP
Lines mainly for commercial purposes would have fallen 2.3% in real terms, with declines in both loans instrumented through documents and through current account advances. In fact, loans granted through documents would have exhibited a decrease of 0.9% s.e. in real terms and would be only 0.3% below their level a year ago. This behavior was mainly due to the evolution of single-signature documents (-1.9% s.e.), while discounted documents showed an increase (2.2% s.e. monthly). For its part, advances would have registered a contraction at constant prices of 5.6% s.e., placing it 12.6% below the June 2022 level.
The Financing Line for Productive Investment (LFIP) continued to be the main tool used to channel credit to the productive activity of Micro, Small and Medium-sized Enterprises (MSMEs). At the end of June, loans granted under the LFIP accumulated $6.272 billion since its launch, an increase of 7.8% compared to last month (see Figure 5.3). Of the total financing granted through the LFIP, 13.9% corresponds to investment projects and the rest to working capital. It should be noted that the average balance of financing granted through the LFIP reached approximately $1,663 billion in May (latest available information), which represents about 18.5% of total loans and 41.2% of total commercial loans.
In terms of GDP, credit to relatively smaller companies stood at around 1.7%, above the pre-pandemic record and the historical average. On the other hand, in the case of large companies, the credit-to-GDP ratio remains around the lowest values in historical terms (see Figure 5.4).
Figure 5.3 | Financing granted through the Productive Investment Financing Line (LFIP)
Accumulated disbursed amounts; data at the end of the month
Figure 5.4 | Commercial Loans by Type of Debtor
As a Percentage of GDP
Consumer loans would have fallen 0.9% s.e. at constant prices during the month and would accumulate a reduction of 14.6% in the last 12 months. Within these lines, credit card financing would have shown an increase in real terms of 0.5% s.e. in June (-10.2% y.o.y.). For their part, personal loans would have exhibited a monthly drop of 3.7% s.e. and 21.7% year-on-year.
With regard to secured lines, at constant prices, collateral loans would have registered a contraction of 1.1% s.e., positioning themselves about 12.0% below the level of a year ago. For its part, the balance of mortgage loans would have shown a monthly decrease of 3.7% s.e., with a fall of 40.4% in the last 12 months.
6. Liquidity in pesos of financial institutions
In June, ample bank liquidity in local currency5 showed a further increase of 3.9 p.p. compared to May, averaging 82.7% of deposits (see Figure 6.1). In this way, it remained at historically high levels. The increase was mainly explained by the LELIQ, the passive passes and the integration with BOTE 2025-27 and other integrable bonds, partially offset by the NOTALIQ and the current accounts at the Central Bank. With respect to the BOTE, it is worth mentioning that at the end of May, the new National Treasury Bond in pesos maturing on August 23, 20256 suitable for minimum cash integration was tendered, which explains the increase in this concept.
In relation to the regulatory changes with a potential impact on bank liquidity, it was provided that the reduction of the minimum cash requirement in pesos based on cash withdrawals through the entity’s ATMs will be applicable to withdrawals made at ATMs located in localities included in categories III to VI7.
Figure 6.1 | Liquidity in pesos of financial institutions
7. Foreign currency
In the foreign currency segment, the main assets and liabilities of financial institutions had a disparate performance. On the one hand, private sector deposits ended June with a balance of US$15,424 million, which implied an increase of US$144 million compared to the end of May. It should be noted that, at the end of the sixth month of the year, the yuan renminbi was incorporated as the accepted currency for taking deposits in savings banks and current accounts8. On the other hand, the balance of loans to the private sector fell by US$149 million and ended the month at US$3,834 million (see Figure 7.1).
Figure 7.1 | Balance of private sector foreign currency deposits and loans
Figure 7.2 | Liquidity in foreign currency of financial institutions
The liquidity of financial institutions in the foreign currency segment fell by 0.8 p.p. compared to the May average, standing at 82.5% of deposits and remaining at historically high levels (see Figure 7.2).
During June, a series of regulatory modifications were made in foreign exchange matters, aimed at favoring an efficient allocation of International Reserves. Among them, those referring to access to the foreign exchange market to make payments for imports9. In turn, the subjects susceptible to subscribing to BCRA bills with adjustment based on the Reference Exchange Rate10 were modified. For its part, with the intention of continuing with a process of deleveraging at a pace that is compatible with the economy’s foreign exchange needs and exchange rate stability, guidelines were established to order the deleveraging of the provinces in foreign currency11. Finally, the swap with the People’s Bank of China (PBoC) was renewed for 3 years for 130,000 million yuan; at the same time, the process of requesting an extension of activation for an amount of up to 35,000 million yuan was initiated.
The BCRA’s International Reserves ended June with a balance of US$27,926 million, registering a decrease of US$5,075 million compared to the end of May (see Figure 7.3). This drop was mainly explained by the payment to the International Monetary Fund of about US$ 2,680 million, which was made through the use of SDRs and yuan from the activation of the swap with the PBoC. Other factors that had an impact, although to a lesser extent, were the sales of foreign currency to the private sector – in the context of a record drought – the fall in minimum cash accounts and the loss on valuation of external liabilities.
Finally, the bilateral nominal exchange rate (TCN) against the U.S. dollar increased by 7.4% in June, a higher increase than in the previous month (see Figure 7.4). Thus, the nominal exchange rate stood at $248.31/US$ on average in the sixth month of the year.
Figure 7.3 | International Reserve Balance
Figure 7.4 | Variation in the bilateral nominal exchange rate with the United States
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.
E.A.: Effective Annual.
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.
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 Corresponds to private M2 excluding interest-bearing demand deposits from companies and financial service providers. This component was excluded since it is more similar to a savings instrument than to a means of payment.
2 The interest rates currently in force are those established by communication “A” 7726.
3 The rest of the depositors are made up of individuals with deposits of more than $30 million and legal entities.
4 Private M3 includes working capital held by the public and deposits in pesos of the non-financial private sector (demand, term and others).
5 Includes current accounts at the BCRA, cash in banks, balances of net passes arranged with the BCRA, holdings of LELIQ and NOTALIQ, and public bonds eligible for reserve requirements.
6 Communication “A” 7767
7 Communication “A” 7795
8 Communication “A” 7796
9 Communications “A” 7781, “A” 7798 and “A” 7799
10 Communication “A” 7788
11 Communication “A” 7782.
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