BMI View : We maintain our cautious outlook for the Argentine freight transport sector. The Argentine economy will contract for a second consecutive year in 2015 as government policies continue to discourage investment and high inflation weighs on real private consumption. We forecast a contraction of 1.3% in GDP in 2015, after an estimated contraction of 0.5% in 2014.
We caution that on top of its internal economic difficulties, the country is struggling with a considerable infrastructure deficit. Investment is needed across the board if the country's rail freight system is to handle increasing volumes over the coming years. Air freight is the only mode in which we expect growth in 2015, but with growth of just 0.15% forecast we caution that the outlook for volumes remains subdued. We expect road and rail volumes to contract by 0.31% and 0.39% respectively. While our outlook softens somewhat over the medium term, as we expect the election of a new government in October 2015 to mark a return to more orthodox, business-friendly economic policies, we caution that unwinding Argentina's economic imbalances will be a prolonged affair, and this is reflected in our forecasts for slow growth to 2019.
Air freight is set to be the only sector in which we will see positive growth over the coming months. We forecast that Argentina's air freight volumes will post slow growth in 2015, of 0.15% on top of 2014's estimated growth of 0.25%. As a sector, air freight is directly tied to Argentina's struggling consumer. Although consumer confidence has risen in recent months as reserves have begun to stabilise and price expansion has slowed, we maintain our forecast for elevated average inflation through 2015, at 17.0%, meaning that imported luxuries such as electronic goods and fresh horticulture will become even rarer.
Sluggish consumer confidence will also put downside pressure on Argentina's road freight volumes over the coming quarters. Although consumer confidence has risen in recent months as reserves have begun to stabilise and price expansion has slowed, we maintain our forecast for elevated average inflation through 2015, at 17.0%. Given our outlook for consumer spending, and wider macroeconomic growth, we expect a contraction in road freight of 0.31% to reach 256mn tonnes in 2015.
Our outlook for rail freight for 2015 is also negative. Argentina benefits from a well-diversified economy, extensive trade links and a well-regulated environment that all contribute towards its status as a near-developed economy, which should have a thriving rail freight sector. However, government intervention, industrial unrest and bureaucratic requirements for businesses are all putting downward pressure on economic growth in the country. Our outlook for sluggish GDP growth is reflected in our rail freight forecasts. We forecast a contraction of 0.39% to reach 22.5mn tonnes.
Key BMI Forecasts :
Air freight volume is set to grow by 4.5% to 242.7mn tonnes in 2015, with average annual growth 5.3% over our forecast period.
Rail freight hauled in 2015 will shrink by -0.39% to 22.6mn tonnes, with average annual growth of 1.7% during our forecast period.
Road freight volumes will contract by 0.31%, to reach 256mn tonnes in 2015, with average annual growth of 1.3% over our forecast period.