Argentina economy set for third straight year-on-year contraction in Q4

By Hernan Nessi

BUENOS AIRES (Reuters) – Argentina’s gross domestic product (GDP) is expected to have shrunk 1.5% year-on-year in the final quarter of 2023, the third straight annualized contraction, hit by declines in virtually all sectors of the economy, a Reuters poll found.

The South American country likely contracted some 1.6% last year and is expected by analysts to shrink again this year, as new libertarian President Javier Milei battles to turn around high inflation and a deep deficit with tough austerity measures.

The measures have helped boost the government’s financial situation and shown signs of reining in prices, but have dampened economic activity, production and consumption.

“We are in a stage where most of the sectors of the economy are deepening their contraction,” said Pablo Besmedrisnik, economist and director of the consulting firm Invenomica, adding the hardest hit would be those associated with consumption.

Primary and tradable sectors, such as farming and energy, would be the exception to a tough wider context, he said.

“A contractionary fiscal policy, with fewer pesos in the market, relative prices that have not yet adjusted, and wages and pensions at rock bottom, mean that the fall in the level of activity is expected to deepen,” he added.

The analysts polled by Reuters estimated the economic contraction in the October-December quarter of between 1.1% to a maximum decline of 1.8%.

Argentina, Latin America’s third largest economy, saw the economy contract 0.8% year-on-year in the third quarter last year after a deep 5.0% slide in the second quarter.

The official INDEC statistics agency is scheduled to release the official fourth-quarter data on Thursday.


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