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ECONOMY | 24-11-2022 01:49

Argentina's economy contracted in September after currency policy

Economic growth has shown resilience this year despite expectations of a recession following political turmoil in July that resulted in the ouster of three economy ministers in four weeks.

Argentina’s economy contracted for the first time in six months in September despite an exchange-rate policy manoeuvre from the government that triggered a boost in crop and dollar exports.

Economic activity fell 0.3 percent in September compared with a month ago, according to government data released on Wednesday. From a year ago, the economy expanded 4.8 percent.

Economic growth has shown resilience this year despite expectations of a recession following political turmoil in July that resulted in the ouster of three economy ministers in four weeks. It is the first contraction for Economy Minister Sergio Massa since he took office in early August.

In September, Massa implemented a measure known as the "soy dollar" – a temporary exchange rate for exporters of the crop that lasted only a few weeks. The policy boosted crop exports, which rose 30 percent last month, but provoked a backlash from the International Monetary Fund over Argentina's US$44-billion programme.

The creation of a new exchange rate violated IMF programme rules and required Argentina to obtain an IMF-approved waiver, where officials criticised the move. However, local media report that Massa intends to implement the policy again in December to shore up the Central Bank's dwindling cash reserves.

The new soybean rate is in addition to a separate exchange rate planned for provincial economies and another for foreign tourists in Argentina, adding to a long list of exchange rates in the country.

by Patrick Gillespie, Bloomberg

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