1. Executive Summary
The monthly inflation rate, both general and core, remained at a level similar to that of the previous month in October. On the other hand, the leading indicators for November anticipate a moderation in inflation, which would continue in the coming months. In this context, the BCRA decided to keep its reference interest rates and the minimum guaranteed rate on fixed-term deposits unchanged, for the second consecutive month and after nine uninterrupted monthly increases.
The broad monetary aggregate (private M3) would have remained practically unchanged in the penultimate month of the year, although with a heterogeneous behavior at the component level. While the means of payment continued to contract, in a context of high interest rates, interest-bearing deposits continued to grow and gain relative share. In fact, by November, time deposits would have reached a level equivalent to that of means of payment, reversing the trend of the last 20 years in which on average they only represented half.
Thus, after a new monthly increase, fixed-term placements at constant prices would have set a new high in historical terms and, as a percentage of GDP, would be at a level similar to the maximum reached during the pandemic.
Finally, loans to the private sector at constant prices and without seasonality have registered a new monthly contraction, accumulating five consecutive months of declines, with a generalized behavior at the level of the large lines of loans.
2. Payment methods
In real and seasonally adjusted terms (s.e.), means of payment (private transactional M21) would have registered a contraction of 1.6% in November, accumulating 10 consecutive months of decline (see Figure 2.1). At the level of its components, the decrease was mainly explained by the behavior of non-interest-bearing demand deposits, while the current outstanding held by the public remained relatively stable. In year-on-year terms and at constant prices, private transactional M2 would have presented a contraction of around 20%. As a Product ratio, the means of payment would have stood at 7.7%, showing a decrease of (0.3 p.p.) compared to the previous month (see Graph 2.2). Both components of the means of payment remain in terms of GDP around the lows of the last 20 years and, in the case of the working capital held by the public, a new minimum was set.
This dynamic of the means of payment is to be expected in a context of high interest rates, which increases the opportunity cost of agents to maintain holdings of unremunerated money. The flip side of the lower demand for means of payment is the greater intensity in the use of interest-bearing deposits, either directly through fixed-term deposits or indirectly through the subscription of Money Market Mutual Funds (FCI MM), whose main investments are interest-bearing current accounts and fixed-term instruments.
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 Central Bank of the Argentine Republic (BCRA) decided to maintain for the second consecutive month without changes the minimum guaranteed interest rates on fixed-term deposits on November2. The decision was made considering the moderation in the pace of price growth in October, the evolution of the leading indicators for November and the future outlook for inflation. Thus, the minimum guaranteed rate for placements of individuals for up to an amount of $10 million remained at 75% n.a. (107.05% e.a.), while for the rest of the depositors of the financial system3 the interest rate stood at 66.5% n.a. (91.07% e.a.).
In this context, in November, fixed-term deposits in pesos of the private sector at constant prices would have registered a new monthly expansion, this time of 3.6% s.e. Thus, the balance of term placements set a new high at constant prices and reached a value equivalent to that of means of payment, when in the last 20 years time deposits represented on average only 50% of means of payment. As a percentage of GDP, these deposits would have stood at 7.6% in November (0.1 p.p. more than in October), a figure that is among the highest in recent years.
Analyzing the evolution at constant prices of term placements by strata of amount, a generalized increase is verified, although the most dynamic segment was that of $1 to $20 million (see Figure 3.1). Deposits of more than $20 million grew on average, driven mainly by the increase in the holdings of companies (excluding Financial Services Providers (PSF). As for FSPs, they maintained their holdings practically unchanged in real terms and without seasonality; in a context in which the assets of the Money Market Mutual Funds (FCI MM), the main agents within the PSFs, changed almost unchanged. Meanwhile, investments with early cancellation options (which cannot be classified by type of holder) continued to decline (see Figure 3.2). Finally, deposits of less than $1 million remained relatively stable once corrected for price developments.
Figure 3.1 | Fixed-term deposits in pesos of the private
sector Var. real monthly and without seasonality by amount stratum
Figure 3.2 | Fixed-term deposits of more than $20 million
Balance at constant prices by type of depositor and instrument. Original Series
The segment of fixed-term deposits adjustable by CER exhibited a new contraction at constant prices, accumulating 4 consecutive months of declines. While traditional UVA placements continued with a downward trend similar to that of previous months, pre-cancelable placements stabilized during November. Thus, the monthly rate of change of traditional UVA placements would have stood at -9.2% s.e. at constant prices, compared to 0.1% s.e. in the case of UVA deposits with an early cancellation option (see Figure 3.3). Distinguishing by type of holder within the instruments with CER adjustment, it can be seen that the average monthly fall is almost entirely explained by the dynamics of placements by individuals and companies (excluding PSF); however, the peak variation in the holdings of human persons was positive, reversing the downward trend (see Figure 3.4). All in all, UVA deposits reached a balance of $365,000 million at the end of the month, which represented approximately 5% of the total of time instruments denominated in domestic currency.
Figure 3.3 | Fixed-term deposits in UVA from the private
sector Balance at constant prices by type of instrument
Figure 3.4 | | Fixed-term deposits in UVA in the private
sector Balance at constant prices by type of holder
On the other hand, deposits adjusted for the value of the reference exchange rate registered a fall in the penultimate month of the year. Currently, the agricultural sector has two different types of deposits with foreign exchange coverage available: a demand account, commonly known as “chacareros deposits” and time investments, called DIVA dollar. The first type of deposit registered a variation at the end of the month of -8.6% at current prices, reaching a balance of $106,000 million at the end of November. This drop reflects the use of part of the funds obtained through the sale of dollars through the Export Increase Program in September. The new edition of the program launched at the end of the month could give new impetus to these deposits. For its part, the DIVA dollar reached a balance of $40,700 million at the end of the month, which implied an average monthly contraction of 1.4% at current prices. To cover the exchange rate risk of these deposits, financial institutions have at their disposal the Bills with adjustment according to the value of the dollar (LEDIV).
However, the broad monetary aggregate, private M34, at constant prices and adjusted for seasonality, would have registered a slight expansion in November (0.7%). In the year-on-year comparison, this aggregate would have registered a decrease of 5.1% and as a percentage of GDP it would have stood at 17.3%, 0.2 p.p. below the previous month’s record.
4. Monetary base
In November, the Monetary Base stood at $4,388.4 billion, registering an average monthly nominal increase of 3.9% ($163,198 million) in the original series. Adjusted for seasonality and at constant prices, it would have exhibited a contraction of 1.7% and in the last twelve months it would accumulate a fall of close to 27%. In terms of GDP, the Monetary Base would stand at 4.5%, 0.1 p.p. below the value recorded the previous month and at its lowest value since 2003 (see Figure 4.1).
Figure 4.1 | Monetary base
Figure 4.2 | Factors explaining the Monthly Average Monetary Base
Among the factors of variation in the monetary base can be mentioned the expansion due to public sector operations (mainly due to the reduction of the balance of the National Treasury account at the BCRA) and the intervention of the BCRA in the secondary market of public securities with the aim of stabilizing the curve in pesos of these bonds. In the same sense, the extension of the Export Increase Program had an impact towards the end of the month. Monetary regulation instruments contributed to the expansion of liquidity, due to the increase in demand for the monetary base, mainly for monetary circulation. These factors were partially offset by the contractionary effect of net foreign exchange sales to the private sector (see Figure 4.2).
The BCRA kept its benchmark interest rates unchanged in November, given the moderation in the pace of price growth in October, the evolution of the leading indicators for November and the future outlook for inflation. Thus, the interest rate on the 28-day LELIQ continued to stand at 75% n.a. (107.35% y.a.), while the interest rate on the 180-day LELIQ remained at 83.5% n.a. (101.23% y.a.). As for shorter-term instruments, the interest rate on 1-day pass-throughs stands at 70% n.a. (101.24% y.a.); while the interest rate on 1-day active passes stands at 95% n.a. (158.25% e.a.). Finally, the fixed spread of the NOTALIQ in the last auction of the month was set at 8.5 p.p.
With the current configuration of instruments, in November the remunerated liabilities were conformed, on average, at 68.6% by LELIQ with a 28-day term. The longer-term species accounted for 12.4% of the total, almost entirely concentrated in NOTALIQ. On the other hand, 1-day pass-by-passes increased their share of total instruments, representing 17.7% of the total (1.5 p.p. more than the previous month). Finally, the LEDIV, together with the LEGARs, accounted for the remaining 1.3%, with a fall of 0.1 p.p. compared to October (see Figure 4.3).
Figure 4.3 | Composition of Interest-Bearing Liabilities of the BCRA
Monthly Average
5. Loans to the private sector
During November, loans in pesos to the private sector, measured in real terms and without seasonality, would have again registered a fall, this time of 2% per month. Thus, financing in pesos to the private sector accumulates five consecutive months of decline, in which the stock fell 10.6% in real terms. The decline occurred in virtually all major funding lines, with the exception of advances (see Figure 5.1). Thus, in the last twelve months credit would have accumulated a fall of 11.3% in real terms. The ratio of peso loans to the private sector to current GDP fell 0.2 p.p. in the month to 6.2% (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 with mainly commercial destinations would have exhibited a fall of 1.3% per month in real terms in the eleventh month of the year and in the year-on-year comparison they would be 7.8% below the level of November 2021. Among these financings, current account advances would have grown 3.2% s.e. in real terms (+5.3% YoY). On the other hand, the financing granted through documents would have exhibited a decrease at constant prices of 2.2% s.e. (-8.7% y.o.y.), explained both by documents with a single signature (-1.1% monthly; -5% y.o.y.) and by discounted documents (-5% monthly; -10.8% y.o.y.).
The Financing Line for Productive Investment (LFIP) continued to be the main tool used to channel productive credit to Micro, Small and Medium-sized Enterprises (MSMEs). At the end of November, loans granted under the LFIP accumulated approximately $3.585 billion since its launch, an increase of 10% compared to last month (see Figure 5.3). On the other hand, of the total financing granted through the LFIP, 14% 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 $1,056 billion in October (latest available information), which represents about 17.5% of total loans and 41.9% of total commercial loans.
With regard to commercial credit by type of debtor, it can be seen that in November, credit to MSMEs in real terms would have contracted in year-on-year terms at a rate of around 2.8%, while credit to large companies would have shown a contraction of 17.2% YoY (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
Var. i.a. at constant prices of the 30-day moving average balance
Among loans associated with consumption, financing instrumented with credit cards would have shown a decrease in real terms of 2.5% s.e. in November, with the average balance being 13.3% below the level of a year ago. Meanwhile, personal loans would have exhibited a 2.1% monthly drop at constant prices and would be 16.3% below the level of November 2021. The interest rate corresponding to personal loans averaged 79.1% n.a. in November (115.2% y.a.), with a decrease of 3.8 p.p. compared to the previous month.
With regard to lines with real guarantees, collateral loans would have registered a decrease in real terms of 2.2% s.e., although they remain 8.2% above the record of a year ago. For its part, the balance of mortgage loans would have shown a fall of 4.7% s.e. at constant prices in the month, accumulating a contraction of 28.3% in the last twelve months.
6. Liquidity in pesos of financial institutions
In November, ample bank liquidity in local currency5 showed an increase of 0.7 p.p. compared to October, averaging 71.6% of deposits, the highest in the last 20 years. Thus, it remained at historically high levels. This increase was mainly driven by the BCRA’s interest-bearing liabilities (with increases in Net Passes and LELIQ, partially offset by the NOTALIQ) and by the integration with public securities. 6
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 mixed performance. On the one hand, the balance of private sector deposits increased for the third consecutive month, averaging US$15,208 million in the month, which implied an increase of US$225 million compared to October, mainly explained by demand deposits. On the other hand, the average monthly balance of foreign currency loans to the private sector remained virtually unchanged in the month (see Figure 7.1).
Figure 7.1 | Balance of private sector foreign currency deposits and loans
Figure 7.2 | Liquidity in foreign currency of financial institutions
The liquidity of financial institutions in the foreign currency segment registered a fall of 0.9 p.p. compared to the previous month, standing at 84.3% of deposits in November and remaining at historically high levels. The decline was explained by both cash in banks and current accounts in foreign currency (see Figure 7.2).
During October, a series of regulatory modifications took place in foreign exchange matters. Thus, in order to allocate foreign currency more efficiently, certain exceptions were established regarding access to the foreign exchange market, within the framework of the new Import System of the Argentine Republic (SIRA) regulated by the National Government7. Among them, the possibility of accessing the foreign exchange market for up to US$ 50,000 to make payments for imports of goods in advance stands out. In addition, the settlement requirement for charges for the provision of services by residents to non-residents was relaxed8. For its part, with the aim of increasing the supply of foreign currency through the establishment of export incentives, at the end of the month the “Export Increase Program” was reestablished, with which exports of soybeans and by-products can be liquidated at a differential exchange rate of $230/US$, exceptionally and temporarily until December 30.
The BCRA’s International Reserves ended November with a balance of US$38,009 million, registering a decrease of US$667 million compared to the end of October. This fall was mainly explained by the net sale of foreign currency to the private sector and payments to international organizations, among which the payment of interest to the International Monetary Fund stood out. These effects were partially offset by the gains on valuation of net foreign assets and the change in the current account balances in dollars at the BCRA (see Figure 7.3)
In the last days of November, operations linked to the Export Increase Program began to be registered. In fact, between November 28 and the last day of the month, net purchases of foreign currency for US$578 million were registered within the framework of the program.
Finally, the bilateral nominal exchange rate (TCN) against the U.S. dollar increased 6.6% in November, a higher increase than in the previous month (see Figure 7.4). Thus, it stood at an average of $162.1/US$.
Figure 7.3 | Variation in the balance at the end of the month of International Reserves
: Explanation factors. November 2022
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.
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 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 rates currently in force are those established by Communication “A” 7527.
3 Financial Services Providers, Companies and Individuals with deposits of more than $10 million.
4 Includes the working capital held by the public and the deposits in pesos of the non-financial private sector (demand, time 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 Among the regulatory changes, it is worth mentioning that it was provided that, as of November 17, financial institutions may integrate the minimum cash requirement that can be integrated with BOTE 2027, with the new “National Treasury Bonds in pesos maturing on November 23, 2027, through Com. “A” 7637.
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