1. Executive Summary
In real and seasonally adjusted terms, means of payment (private transactional M2) would have registered an increase at constant prices in October. In the month, the entry of salary adjustment tranches of several unions had an impact and the greater tourist movement was due to the long weekend at the beginning of the month.
Fixed-term deposits after three consecutive months of increases would have presented a contraction in real terms. The fall was generalized in all strata of amount and in the various instruments available (adjustable by CER and denominated in pesos). The main decline occurred in the wholesale segment in pesos, a segment in which the behavior of Money Market Mutual Funds (FCI MM) is important.
Loans in pesos to the non-financial private sector registered a positive expansion rate at constant prices, with increases in all lines. However, short-term commercial lines (discounted documents and advances) were particularly highlighted.
The BCRA’s International Reserves ended October with a balance of US$42,817 million, which meant a decrease compared to the previous month. The net purchase of foreign currency and minimum cash contributed positively in the month, partially offsetting the dynamics of the rest of the components.
2. Payment methods
In real terms1 and adjusted for seasonality (s.e.), means of payment (private transactional M22) would have registered an increase (1.5%) in October, after two months of stability. At the component level, the largest contribution to growth came from non-interest-bearing demand deposits, although working capital held by the public also contributed positively to the month’s variation (see Figures 2.1).
Among the factors that impacted the evolution of transactional means of payment in October is the entry of salary adjustment tranches agreed in parity by several unions. This was reflected in the growth of transactional demand deposits during the first days of the month. Another factor that temporarily encouraged the demand for transactional money was the greater tourist movement by virtue of the long weekend.
Figure 2.1 | Private transactional
M2 Contribution by component to the monthly change s.e. at constant prices
Figure 2.2 | Transactional private M2 in terms of GDP
In October, private transactional M2 stood at 9.8% of GDP, a record similar to that verified in previous months. In this way, it continued to be below the average record for the period 2010-2019. The low level of means of payment in terms of GDP was mainly explained by the dynamics of the circulating currency held by the public, given that the transactional view was around the average. In fact, banknotes and coins in the hands of the public were positioned 1.6 p.p. below the average recorded between 2010 and 2019 and at a value close to the minimum of the last 15 years (see Figure 2.2).
3. Savings instruments in pesos
Fixed-term deposits in pesos in the private sector would have registered a contraction in real terms in October (-1.3% s.e.), after three consecutive months of positive variations. Although the fall was widespread in all strata of amount, this dynamic was explained by the change in the behavior of deposits in the wholesale segment (see Figure 3.1). Despite the decrease in forward placements in the month, it should be noted that at constant prices they still persist at levels markedly higher than those of the average record of 2010-2019 (see Figure 3.2).
Figure 3.1 | Fixed-term deposits in pesos of the private
sector Contribution by layer of amount to the real monthly variation
Figure 3.2 | Fixed-term deposits in pesos of the private
sector Average monthly balance at constant prices
The behavior of placements in the wholesale stratum (more than $20 million) was not homogeneous among the main agents operating in this segment. Companies maintained a balance of placements at constant prices similar to that of September on average. However, the relative stability between months hides a fall in the first weeks, explained by the payment of taxes and higher salary expenditures, and a subsequent recovery, originated in the accumulation of surpluses once the period of higher expenses has passed. On the other hand, Financial Services Providers (FSPs) presented a real drop in their term holdings on average in October, where the carry-over effect of the previous month played an important role since it could not be compensated by the dynamics of the month. In fact, in the first days of October, the term placements of these agents remained unchanged, in a context of relative stability of the assets of the Money Market Mutual Funds (FCI MM). Meanwhile, in the second fortnight, the greater availability of funds from the FCI MM resulted in an increase in interest-bearing demand placements, in a context of greater preference for liquidity, and to a lesser extent in fixed-term deposits. It should be noted that the return on time deposits of more than $20 million remained without significant changes in the period under analysis. In fact, the TM20 of private banks stood at 33.9% n.a. (39.8% y.a.).
As for deposits of lower strata, placements of between $1 and $20 million at constant prices presented a slight drop, being the first negative variation of the year. On the other hand, retail time deposits (less than $1 million) continued to show a downward trend once adjusted for price evolution. It should be noted that the interest rate on time deposits of less than $1 million paid to individuals stood at an average of 36.3% n.a. (43.0% e.a.)3.
In terms of instruments, the drop was also widespread. In fact, at constant prices in October, a decrease was observed, both in deposits in pesos and those adjustable by CER. In the case of UVA deposits, the decline occurred in a context in which the interest rate differential between these placements and those denominated in pesos continued to turn in favor of the latter. Within the segment not adjustable by CER, the performance was also not homogeneous between traditional and pre-cancellable placements, the latter partially compensating for the fall in the former.
All in all, the broad monetary aggregate M3 private4 at constant prices would have registered an increase of 1.6% s.e. in October, the highest growth rate since August last year. In the year-on-year comparison, this aggregate would have presented a contraction of around 5%. In terms of Output, it stood at 18.2%, 6.0 p.p. below the maximum of 2020.
4. Monetary base
In October, the Monetary Base stood at $3,009 billion, which implies an average monthly nominal increase of 2.5% (+$72,087 million). This expansion was mainly explained by public sector operations, which, so far this year, accounted for 1.9% of GDP, a lower figure than in the first year of the pandemic and in 2015 to 2017 (see Figure 4.1). Sterilization instruments also contributed positively to the variation of the month, due to a slight decrease in the stock of BCRA securities (LELIQ and net passes). On the other hand, the external sector was contractionary, which was explained by the statistical carryover from September. In fact, if we consider the variation at the end of the month, net purchases of foreign currency from the private sector were recorded for US$207 million (see section “Foreign Currency”). All in all, the Monetary Base at constant prices registered a contraction of close to 17% YoY, in line with the records of previous months (see Figure 4.2).
Figure 4.1 | Primary expansion of the public sector*
Accumulated to October of each year
Figure 4.2 | Monetary Base
Year-on-year change at constant prices
5. Loans to the private sector
In October, loans in pesos to the private sector would have expanded at a monthly rate of 1.5% in real terms and without seasonality. The increase in the month was mainly explained by the evolution of commercial lines. Secured and consumer loans also contributed positively to the month’s variation, although to a lesser extent (see Figure 5.1). Loans in pesos to the private sector in terms of GDP continued to stand at 7% (see Figure 5.2).
Figure 5.1 | Loans in pesos to the Real Private
Sector without seasonality; contribution to monthly growth
Figure 5.2 | Loans in pesos to the private sector as a percentage of GDP
Overall, the lines with essentially commercial destination would have presented a monthly growth of 2.5% in real terms without seasonality. The upward momentum came mainly from the shorter-term lines. In fact, financing granted through current account advances showed a real increase of 4.9% s.e., largely explained by placements to large companies. Likewise, discounted documents showed a monthly growth of 2.8% s.e. at constant prices, driven mainly by the Financing Line for Productive Investment (LFIP) for MSMEs (see Figure 5.3). With respect to longer-term financing, single-signature documents registered a 1.5% increase s.e. in real terms during the month. On the other hand, if we analyze the composition of commercial loans by type of debtor, we can see that financing to MSMEs would have expanded again in October (3.9% at constant prices). On the other hand, credit to large companies would have exhibited a monthly increase of 1.5%, after 2 months of negative real variations (see Figure 5.4).
Figure 5.3 | Documents discounted to the private sector without seasonality
Monthly var. at constant prices
Figure 5.4 | Trade loans to the private sector by type of debtor
Balance at constant prices
In October, loans granted under the LFIP increased by $149.3 billion. Thus, the accumulated disbursements since its implementation totaled about $1,187 billion. With regard to the destinations of these funds, about 84% of the total disbursed corresponds to the financing of working capital and the rest to the line that finances investment projects (see Figure 5.5). At the time of publication, the number of companies that accessed the LFIP amounted to around 183,700. It should be remembered that this month the 2021/2022 Quota of the LFIP came into force. This new section incorporates some modifications with respect to the previous ones, giving it a greater scope5.
As for consumer-related loans, credit card financing would have presented a monthly expansion of 0.7% s.e. in real terms in October, reversing 6 consecutive months of declines. Among the factors that contributed to explain this dynamic are the “Ahora 12” program and the accreditations within the framework of the 0% rate credit line for single-tax individuals. This line accumulated disbursements totaling $24,100 million at the end of October. Meanwhile, personal loans showed an increase of 0.8% s.e. at constant prices, marking 2 consecutive months of positive real variations (see Figure 5.6). The interest rate corresponding to the latter line averaged 52.9% n.a. in October, 0.8 p.p. below that of the previous month.
With respect to lines with real collateral, collateral loans would have registered an average monthly increase of 4.5% s.e. in real terms in October, accumulating 16 consecutive months of positive variations at constant prices. Thus, the real year-on-year rate of expansion would be around 35.3%. Finally, the balance of mortgage loans would have exhibited a monthly increase of 0.6% in real terms without seasonality, although standing 21.8% below last October’s record.
Figure 5.5 | Financing granted through the Productive Investment Financing Line (LFIP)
Accumulated disbursed amounts; data at the end of the month
Figure 5.6 | Personal loans without seasonality
Var. at constant prices
6. Liquidity in pesos of financial institutions
Ample bank liquidity in local currency6 remained at historically high levels. In October, it averaged 67.2% of deposits, a value similar to that of the previous month. Nor were significant changes observed in terms of their composition (see Figure 6.1). In particular, it is worth noting that the integration of minimum cash with public securities, an option that has been available since June, continued to increase. The counterpart of this growth was a retraction of integration with LELIQ.
Regarding the regulatory changes related to bank liquidity, it was established that as of November the minimum residual term of national public securities in pesos acquired by primary subscription that can be used for minimum cash integration will be reduced from 180 to 120 calendar days7.
Figure 6.1 | Liquidity in pesos of financial institutions
7. Foreign currency
With regard to the foreign currency segment, the main assets and liabilities of the entities showed negative variations (see Chart 7.1). Loans to the private sector continued the downward trend of the previous month. Thus, they reached an average monthly balance of US$4,761 million, about US$322 million below the September balance. The fall was concentrated in financing instrumented through single-signature documents, a line mainly intended for the pre-financing of exports. For their part, private sector deposits began to fall in the second part of the month. Thus, the average monthly balance stood at US$16,273 million, which implied a drop of around US$80 million compared to September.
In a context in which the rate of decline in loans was higher than that of deposits, bank liquidity in foreign currency registered an increase in the month (1.8 p.p.), with increases in the current account at the BCRA and in cash in banks. Thus, liquidity in the financial system remained at high levels, standing at 79.8% of deposits (see Figure 7.2).
Some regulatory changes took place during the month. On the one hand, the mechanism by which advance payments are made for certain imports was modified, which during October must be made from the release of the goods to the market. The measure was taken in a context in which, since June, payments had been registered for a value greater than the dispatch of merchandise to Plaza8. In addition, new measures were established with the aim of maintaining the flow of inputs required by economic activity, giving predictability to the demand for foreign currency and guaranteeing the stability of the payment market. Thus, effective from November, inputs imported to be used in the manufacture of goods in the country may be paid at the port of origin, for a maximum amount equivalent to the average value of the total imports made in the last twelve months9.
In addition, the National Securities Commission (CNV) established a series of measures related to the conclusion of transactions with negotiable securities with settlement in US dollars, both in local and foreign jurisdictions10. Finally, the BCRA established that tourists visiting Argentina will have the possibility of opening a bi-monetary savings account, or obtaining a prepaid card to make purchases in pesos in stores in the country, withdraw cash from national currency and carry out financial operations for currency exchange. To do this, they must have a bank account in their country of origin, which will be the only one enabled to transfer foreign currency to the local account. In this way, tourists are facilitated the entry of foreign currency and the management of electronic payment systems in the country11.
Figure 7.1 | Balance of private sector foreign currency deposits and loans
Figure 7.2 | Liquidity in foreign currency of financial institutions
The BCRA’s International Reserves ended October with a balance of US$42,817 million, which meant a decrease of US$94 million compared to the end of the previous month (see Figure 7.3). Net purchases of foreign currency from the private sector, which reached US$207 million in the month, and the minimum cash position of banks contributed positively to the variation in reserves, partially offsetting the negative contribution of the rest of the components.
Finally, the nominal bilateral exchange rate against the U.S. dollar increased 1.0% in October, a slightly lower rate of expansion than the previous month, standing at $99.22/US$ on average for the month (see Figure 7.4). The slower rate of depreciation of the domestic currency in recent months seeks to contribute to the disinflation process.
Figure 7.3 | BCRA
International Reserves Daily Balance
Figure 7.4 | Variation in the bilateral nominal exchange rate with the United States
Glossary
ANSES: National Social Security Administration.
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.: Annual Effective
NOCOM: Cash Clearing Notes.
ON: Negotiable Obligation.
GDP: Gross Domestic Product.
P.B.: Basic points.
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.
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 INDEC will release October’s inflation data on November 14.
2 M2 private 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.
3 The average interest rate observed is slightly below the minimum guaranteed interest rate, because it includes deposits of up to $1 million from individuals who, in total, in the financial institution can exceed one million pesos and, therefore, charge a lower interest rate for amounts that exceed this threshold. In addition, this minimum rate only corresponds to banks in Group A and G-SIB, and may be the lowest minimum rate for the rest of the entities.
4 Includes the working capital held by the public and the deposits in pesos of the non-financial private sector (sight, term and others).
5 For a greater degree of detail, see the Loans to the Private Sector section of the September Monthly Monetary Report.
6 Includes current accounts at the BCRA, cash in banks, balances of net passes arranged with the BCRA, holdings of LELIQ, and bonds eligible for reserve requirements.
7 See Communication A7383.
8 See Regulatory Summary Communication A7375.
9 See Regulatory Summary Communication A7385.
10 General Resolution 907/21 of the CNV.
11 See Regulatory Summary Communication A7384.
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