Argentine economy falls 4.2% YoY in April

It is the first interannual decrease registered this year. Consulting firms predict the country’s GDP will drop 3% in 2023

Economic activity in Argentina fell 4.2% in April when compared to the same month last year, and 1.9% when compared to March, according to the National Institute for Statistics and Census (INDEC, by its Spanish initials). It is the first interannual decrease registered this year.

However, ten out of the sixteen economic activities registered interannual increases – mining and quarrying grew by 9%, hotels and restaurants 3.7%, and manufacturing industry by 1.6%.

The items with the hardest year-to-year drops were fishing (-73.1%) and agriculture, livestock, hunting and forestry (-36.8%). The two economic activities combined slashed 4 percentage points off the month’s economic activity.

In March, a report by the Rosario Grains Exchange (BCR, by its Spanish initials) calculated that the fierce drought that punished Argentina’s farm sector shriveled the country’s GDP by three percentage points.

The International Monetary Fund (IMF) calculated Argentina’s GDP will grow only 0.2% this year, while the government’s budget —approved before the drought— estimated that the country’s economy would increase by 2%.

The Central Bank’s Market Expectations Survey (REM, by its Spanish initials) from May, which calculates an average based on the country’s top consulting firms, estimated that the country’s GDP will fall 3% this year and 0.3% in 2024.

On Friday, the INDEC also published the April wage index, which showed a 5.7% increase for the month and a 29.1% for 2023, while projecting a 103.8% year-on-year increase. All of these numbers are less than the inflation index — which was 8.4% in April, 108.8% year-on-year, and 32% from January to April.

The drought has not only affected the country’s GDP, it has also slashed exports and deepened Argentina’s international reserve scarcity crisis. Consulting firm Ecolatina calculated that, after Friday’s IMF payment, the Central Bank’s net international reserves are at a record-low negative US$3.5 billion.

According to Ecolatina’s report, reserves will continue to drop not only because of the drought but also due to “the usual pressures on the exchange rate that happen on the eve of elections and in the months prior to an eventual transition,” as well as the government’s strategy of intervening in the financial market to contain the exchange rate gap.
An Economy Ministry team is expected to travel to Washington this week and close the renegotiations with the IMF, which would mean a new disbursement from the lender, part of which the government expects to use to contain currency runs. However, according to Ecolatina, the conditions that could be imposed in order to anticipate the disbursements -–such as more austerity measures— are still unknown.


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