Argentina’s GDP stumbles in 2nd quarter, despite interannual economic rebound

By Natalia Kidd

Buenos Aires, Sep 21 (EFE).- Argentina’s Gross Domestic Product stumbled during the second quarter, shrinking by 1.4 percent compared to the previous quarter, despite the strong recovery registered when compared with the same period in 2020, when the country’s economy suffered an historic plunge.

According to figures released Tuesday by the National Statistics and Census Institute, the 1.4 percent decline in the second quarter is the first negative performance in the indicator after three consecutive quarterly gains.

The economic contraction comes amid new restrictions implemented by the Alberto Fernandez administration during the second quarter to deal with the second wave of Covid-19, to which must be added inflation exceeding 3 percent per month that has moderated the recovery in purchasing power and consumption.

The government acknowledged in its 2022 Budget document sent last week to Parliament that recent economic figures have shown the “impact of the second wave of infection,” with drops in economic activity in April and May, although there were signs of recovery in June starting with the relaxation of some restrictions.

According to the official figures, despite the contraction vis-a-vis the first quarter, Argentina during the second three-month period showed an interannual recovery of 17.9 percent on top of two consecutive quarters with GDP growing in interannual terms after the 9.9 overall economic downdraft last year.

The magnitude of the interannual recovery seen in the second quarter should be understood on the basis of an unprecedented comparison, given that in the same period in 2020 the GDP had suffered an historic plunge of 19 percent as a result of the falloff in economic activity resulting from the severe health restrictions imposed in Argentina.

According to the official report, in the second quarter Argentina showed an interannual increase of 21 percent in overall supply stemming from a 17.9 percent recovery in the GDP and a 36.6 percent expansion in the imports of goods and services.

Overall demand increased by 6.3 percent in exports of goods and services, on an interannual basis, and by 76.6 percent in the gross creation of fixed capital.

In all, public consumption showed an interannual improvement of 8.2 percent while private consumption moved up by 21.9 percent.

By sectors, activity in the hotel and restaurant sector increased by 90.3 percent, construction by 84.2 percent and industrial manufacturing by 32.4 percent, while the only sector to see a drop in activity was agriculture and livestock, which fell by 3.9 percent on an interannual basis.

According to the government figures, the GDP rose by 10.3 percent during the first quarter of this year.

The 2022 Budget plan forecasts that the Argentine economy will finish out this year with 8 percent overall growth, thus putting an end to the three-year cycle of severe recession, and will grow by an additional 4 percent next year.

Overall, the projections of private economists consulted on a monthly basis by the Argentine Central Bank for its report on expectations are slightly more moderate. According to those forecasts, the country’s economy will grow by 7.2 percent in 2021 and by 2.5 percent in 2022.

As the government said in its budget proposal, “Today, the figures show that Argentina is moving along the road to recovery … to the levels of activity prior to the pandemic” and is opening “the door to a second phase of recovery” in 2022 to “repair the profound damage resulting from the macroeconomic crisis” of 2018-2019.

According to the government, the evolution of economic activity in the coming months will depend on the health situation, although in the administration’s judgment expectations are “positive” due to the advances in the vaccination campaign, the drop in the number of new daily Covid-19 cases and the reopening of various activities depending on the health situation.

EFE