US Banks Maintain Optimism on Argentina's Macro Outlook, but Warn of Growth Challenges

While Kristalina Georgieva was in Argentina and following the upgrade of the sovereign debt rating by Moody's, major international banks released their analysis reports on the situation in Argentina. Most maintain a favorable view on the country's economic prospects, although with some observations mainly related to growth.

While Citi believes that the global scenario will start to play in favor of emerging markets, Barclays holds a positive outlook on the macroeconomic consolidation process, and J.P. Morgan slightly adjusted its growth forecast for 2026 downwards after a weaker-than-expected activity data.

The common denominator of the reports is that a more benign international context, with lower inflationary pressures, a potential monetary easing by the Federal Reserve, and greater financial stability, could improve conditions for Argentine assets during the second half of the year.

Citi believes that the factors that dominated the markets during the first half --- uncertainty about rates in the United States, geopolitical volatility, and rising oil prices --- are beginning to moderate. Despite Citi's optimistic view, Brent oil remains above $80, benefiting Argentina's exports but maintaining uncertainty in international markets, making it difficult for the country risk to breach 400 basis points.

In this scenario, the entity maintains a positive recommendation on emerging equity and projects a close to 12% advance for the MSCI Emerging Markets index by the end of the year.

However, the bank itself warns that this scenario will depend on whether inflation in the US continues to decelerate. In a presentation on Argentina and Uruguay, Citi Research's chief economist for the Southern Cone, Ricardo Dessy, pointed out that the main risk for the Argentine economic program comes from the external front.

"The biggest global threat is the rise in rates. It would be very bad because it finds us in the midst of a reserve buying process and could affect the continuity of the program," he stated.

For the economist, a more restrictive monetary policy by the Federal Reserve would strengthen the dollar, tighten international financial conditions, and reduce the flow of capital to emerging markets. "It would be like taking away the ladder while we are painting the ceiling," he illustrated.

Beyond this risk, Citi maintains a 'moderately optimistic' view on the Argentine economy and highlights four pillars that support the economic program: the consolidation of fiscal balance, the recovery of international reserves, the deceleration of inflation, and the growth of exports, mainly driven by the energy and mining sectors.

Barclays continues to show a positive perspective on the economic program, although it revised some of its fiscal estimates.

The entity projects a primary surplus equivalent to 1.1% of GDP in 2026, down from the previous estimate, as a consequence of revenue affected by the slowdown in some activity sectors and by the reduction of certain tax rates.

However, it highlighted that primary spending remains under control and accumulated a real decline of nearly 2% during the first half, a factor that, according to the bank, continues to support the fiscal consolidation process. At the same time, Barclays warned that a sharper slowdown in labor-intensive sectors could become a challenge for the political sustainability of the economic program.

J.P. Morgan, for its part, reduced its growth projection for 2026 from 3% to 2.7%, after a lower-than-expected activity data for May was released. Despite the cut, the bank continues to expect a gradual recovery during the second half of the year, driven by disinflation, an improvement in real household income, and an expansion of credit.

In fiscal matters, it maintains the expectation of a balanced budget for this year and projects a trade surplus close to $25 billion, while estimating that gross international reserves will increase by around $9.5 billion, reaching nearly $50 billion by the end of 2026.

Finally, to highlight Argentine stocks, J.P. Morgan reaffirmed its 'Overweight' recommendation on Vista Energy, with a target price of $93 per share, while UBS reiterated its buy recommendation and a target of $87.

Both entities highlighted the results of the second quarter, the growth of production, the improvement of EBITDA, and the integration of the assets acquired from Equinor as the main drivers of the oil company's performance.