- Due to the projected impact of the Covid-19 (coronavirus) pandemic, we have revised down our 2020 consumer spending outlook for Argentina. We now forecast real household spending to decline by -9.7% y-o-y in 2020, down from 1.3% y-o-y growth previously forecast in our pre-Covid-19 2020 projection.
- The 2020 contraction will be deeper than the -7.0% y-o-y decline estimated in 2019. Argentina was one of the first countries in Latin America to enforce strict social distancing measures, with a full nationwide lockdown announced on March 20 2020.
- Argentina has confirmed a total of 1,715 cases of infection from the virus and 63 deaths reported as of April 9 The first case was reported on March 3.
- To aid the nation’s economy and by extension its consumers, President Alberto Fernández has announced a stimulus package of ARS700bn (USD10.2bn) to help protect Argentineans affected by the Covid-19 outbreak, equivalent to 3.5% of its GDP.
Argentina is one of the first countries in Latin America to announce the most stringent of social distancing measures, with a full nationwide lockdown announced on March 20. Strict enforcement measures have also been put into place, with prison sentences varying from 6 months to two years for those who do not adhere to the lockdown measures. The Ministry of Security has further announced that a hotline is available to report on those who are not abiding by the quarantine rules.
|Travel ban announced March 20 with all borders closed.
|School/ University Closures
|Full lockdown announced March 20 which forced closures of schools and universities.
|Social Distancing/ Ban on mass gatherings
|Full lockdown was announced prior to other less stringent social distancing measures (such as a ban on a certain number of people at a gathering or event). The full lockdown therefore bans gatherings.
|Hospitality/ Retail closures
|Full lockdown announced March 20, which forced the closure of restaurants, shops and bars.
|One of the first countries in Latin America to enforce a lockdown and also one of the strictest globally, in its enforcement measures, with jail terms in place should the population break the lockdown.
|A ARS700bn (USD10.2bn) stimulus package, equivalent to 3.5% of the country’s GDP to help protect Argentineans affected by the Covid-19 outbreak has been announced by President Alberto Fernández. Measures include, the creation of an Emergency Family Income, which will provide a one-time payment of up to ARS10,000 (USD145.3) for vulnerable families affected by Covid-19, aged 18-65.The government has also taken steps to put into place price controls on food, drink and other essential items, to mitigate the risk of price gouging.
Due to the projected impact of the Covid-19 (coronavirus) pandemic, we have revised down our 2020 consumer spending outlook for Argentina. We now forecast real household spending to decline by 9.7% y-o-y in 2020, down from 1.3% y-o-y growth previously forecast in our pre-Covid-19 2020 projection. The 2020 contraction will be deeper than the 7.0% y-o-y decline estimated in 2019.
Argentina was one of the first countries in Latin America to enforce strict social distancing measures, with a full nationwide lockdown announced on March 20 2020. The swift response from the government, will contribute to containing the Covid-19 outbreak, but even taking into account the government’s fiscal assistance of an ARS700bn (USD10.2bn) stimulus package, equivalent to 3.5% of the country’s GDP, the country’s economic outlook is deteriorating, with our country risk team forecasting real GDP to contract by -5.2% y-o-y in 2020, down from -2.5% y-o-y previously forecast for our pre-covid-19 projection for 2020 and down on the -2.2% recorded in 2019. We also highlight the high debt burden in Argentina (78.4% of GDP), which will place additional pressure on its economic outlook, as the government seeks to get some form of relief from its IMF loan repayments.
Argentina Consumer Spending 2020 Revisions
Argentina - Real Total Household Spending (% change y-o-y)
We also note that alongside government measures, private businesses are also ensuring that they play their part in managing the Covid-19 outbreak. This is the case for Argentinean online e-commerce platform, Mercado Libre has put into place a number of concessions including withdrawing commissions on over 200,000 products. They have further deferred credit payments from its online payment Mercado Crédito, postponing up to 2mn payments due in March. The company is also offering a 15% discount via QR code for those who pay for their pharmacy purchases via the online payment Mercado Pago app.
Consumer behaviour and government measures to stem the flow of the Covid-19 infection are leading to dramatically shifting purchasing patterns. We highlight that consumers are placing a greater focus on essential spending categories. For consumers in countries where a lockdown has been initiated, and for consumers who believe that their governments might implement this measure, the spending focus is narrowing further, with a concentration on priority purchases (food and non-alcoholic and health spending). By measuring existing data, tracking government virus measures and learning from other countries (where the virus broke out earlier), we have made the below revisions to our 2020 consumer spending forecasts.
|Consumer Spending Category
|2020 Covid-19 Revision
|2020 Pre-Covid-19 Forecast
|Food and non-alcoholic drinks spending, ARS % y-o-y
|As an essential spending segment, we believe that consumer spending on food and non-alcoholic drinks will be somewhat shielded from the negative impact on consumer purchasing habits. An avoidance of public spaces and closing of restaurants will lead to an uptick in consumers cooking at home and so we project greater spend on food and drinks purchases.
|Alcohol and tobacco spending, ARS % y-o-y
|The shuttering of restaurants and bars on March 20, will lead to growing demand, off-trade an overall decrease in both alcohol and tobacco.
|Clothing and footwear spending, ARS % y-o-y
|With consumers staying away from shopping malls, clothing retailers will see less foot traffic, affecting overall sales. Some companies which have ecommerce will continue to operate.Argentinean fast fashion retailer, 47 Street is providing free delivery and up to 50% discount.
|Housing and utilities, ARS % y-o-y
|The government has announced the creation of an Emergency Family Income, which will provide a one-time payment of up to ARS10,000 (USD145.3) for vulnerable families affected by Covid-19, aged 18-65. We believe that this and the general slowing of the county’s housing market will pulldown consumer spend in this segment, but we also warn that with consumers staying at home utility bills have the potential to be higher.
|Furnishing and home spending, ARS % y-o-y
|In lockdown, many shops and malls have shuttered which will lead to a decrease in furnishing and home spending. Easy, Chilean homeware company, has announced that they will keep their e-commerce channels open in Argentina. We believe however that while supply might remain open demand will decrease for this segment as consumers focus their spending on priority purchases and in the current economic climate demand for the ‘big ticket’ items in this segment will be very weak.
|Health spending, ARS % y-o-y
|Pharmacies remain open and will be in demand. Pharmacies in Argentina are adapting their operations, with the help of apps and delivery services. For example they are prioritising medication over other health products and have set limits on the amount of some products consumers can purchase. Argentina’s Farmacity, the country’s largest pharmacy chain, has established an online schedule, which notifies when customers can come collect their medicine. They have also implemented free delivery of medicines to homes through the couriers/ delivery apps Rappi and Glovo.
|Transport spending, ARS % y-o-y
|With the country being in lockdown, transport will be limited. According to the latest Google's mobility report (March 29), transit in train stations and bus stops has decreased by -80%.
|Communications, ARS % y-o-y
|We also do not expect high demand for communications equipment, as spending priorities are focused elsewhere and during lockdown the majority of retail outlets selling these goods have been shuttered. Electronics manufacturer, Mirgor announced in March that it was planning to lay-off 745 workers in its Tierra del Fuego plant, due to Covid-19. This has been attributed to the declining consumer demand for cellphones.
|Recreation and culture spending, ARS % y-o-y
|With the country in lockdown, consumers will not be able to attend a variety events, while many planned events will continue to cancel or postpone.
|Education spending, ARS % y-o-y
|Schools and universities have been closed and some classes have moved online. We highlight that demand for online tutoring may increase, but will be balanced out by a decline in offline tutoring.
|Restaurants and hotels spending, ARS % y-o-y
|This spending segment is heavily exposed to the lower footfall in public spaces (malls, retail outlets etc.) and travel restrictions.
|Personal, Insurance and other spending, ARS % y-o-y
|While demand for personal care remains, retailers selling these products have been shuttered and e-Commerce firms have announced that they will prioritise the delivery of food and medical products over other segments.
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