GDP grew at fastest pace since 2018 in first quarter

Argentina’s economy grew at the fastest pace since 2018 at the start of this year as higher agricultural prices boosted exports, while investment and consumer spending continued to recover from last year’s crash.

Gross domestic product grew 2.6 percent from the previous quarter, higher than economists expectations for a 2.3 percent increase. From a year ago, Argentina’s economy grew 2.5 percent in the first quarter, its fastest pace in three years, according to data published by the INDEC national statistics bureau on Wednesday.

Exports surged 19.2 percent on a quarterly basis, aided by rising prices for soy products and other commodities. Capital spending jumped 6.1 percent.

Argentina’s economy will grow this year for the first time since 2017, according to the Central Bank’s monthly survey, as business activity picks up after the downturn caused by the pandemic. Even so, business leaders complain that they are being held back by price controls, an overvalued exchange rate and export curbs designed to keep a lid on inflation.

Analysts forecast a contraction in the second quarter, according to the bank’s monthly survey. A strict lockdown in part of May and a farmer’s strike in protest of a temporary ban on beef exports likely weighed down activity during that period.

“The economy’s exit from debt and poverty remains in flux,” said Adriana Dupita, economist at Bloomberg Economics. “The pandemic will constrain the recovery in services and employment in the near term.”

A ban on firing workers is also slowing the recovery by providing a deterrent to hiring new employees, according to Argentine industry chamber UIA. Annual inflation accelerated to 49 percent in May, its fastest pace since the pandemic hit the country last year, while wage growth hasn’t kept up.

Although vaccinations have picked up in recent weeks, only eight percent of Argentines are fully vaccinated, trailing regional peers such as Brazil, Mexico and Chile. Argentina has surpassed the United States in total deaths per million people.

by Patrick Gillespie, Bloomberg