Argentina’s economy rebounded less than expected at the start of 2023 ahead of an expected recession later this year on soaring inflation and a record drought.
Gross domestic product in South America’s second-largest economy expanded 0.7 percent in the first quarter from the October-December period, less than the 0.8 percent median estimate from analysts in a Bloomberg survey. From a year ago, GDP rose 1.3 percent, according to government data published by the INDEC national statistics bureau on Thursday.
Public expenditures, consumer spending and capital investments each drove growth in nearly equal measure, but a 13.5 percent drop in exports and surge of imports weighed down expansion during the quarter.
Argentina’s return to growth is being overshadowed by expectations the economy will dive into recession by the third quarter, according to the Central Bank’s most recent analyst survey. A record drought is undercutting agriculture exports that drive activity, tax revenue and trade, while inflation soaring over 114 percent is curbing consumer spending. Import restrictions exacerbated by the government’s shortage of dollars are also denting manufacturing.
More recent data confirmed a downturn on the horizon. On Wednesday, Argentina reported a US$1.2-billion trade deficit in May, its largest negative figure since 2018 when another drought triggered recession.
Unemployment in Argentina’s formal job market rose to 6.9 percent during the first quarter. Still, about half the labour force works informally in mostly all-cash jobs where data is harder to track.
Economists see GDP contracting in both the second and third quarters. For the year, they project a contraction of three percent.
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by Patrick Gillespie, Bloomberg
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