Argentina: Economic activity slows sharply in Q4; 2013 growth confirmed at below warrant holders' threshold
May 9, 2014
On 9 May, the National Statistics Institute (INDEC) announced that the economy expanded 1.4% over the same quarter last year. The reading is based on a new GDP calculation methodology adopted by INDEC in March of this year, which shifts the base year of calculation from 1993 to 2004. The fourth quarter reading came in below both the revised 3.5% increase recorded in the previous quarter (previously reported: +5.5% year-on-year) and the 2.7% rise that market analysts had expected. In addition, the Q4 expansion represented the lowest growth rate in a year.
The moderation largely reflected a sharp drop in exports and a mild contraction in private consumption. Private consumption recorded its largest decrease since the series began in 2004, declining 0.2% in Q4 (Q3: +5.9% year-on-year). Conversely, public spending accelerated to a 9.8% increase in Q4 (Q3: +9.0% yoy). Gross fixed investment decelerated to a 1.8% rise (Q3: +5.1% yoy).
On the external side of the economy, exports tumbled 12.1% in annual terms in Q4 (Q3: -2.9% yoy), which represented the worst performance since Q3 2009. Imports followed suit and contracted 3.9%, which contrasted the 2.1% growth tallied in the previous quarter. As a result of the strong decline in exports, the contribution from the external sector to overall growth deteriorated, decreasing from minus 1.0 percentage points in Q3 to minus 1.2 percentage points in Q4.
On a quarter-on-quarter basis, GDP contracted a seasonally-adjusted 0.4%, which contrasted the 1.0% increase tallied in Q3.
INDEC adopted the new methodology after the International Monetary Fund (IMF) requested that Argentina amend its national account statistics; the IMF had previously censured the country for providing inaccurate data. Previous official GDP figures had been viewed with suspicion both within the country and abroad for overestimating economic growth ever since President Nestor Kirchner changed senior personnel at the National Statistics Institute (INDEC) in 2007. New figures bring official estimates closer to the independent estimates that local private analysts produce, which point to lower growth than official sources were reporting. According to the new methodology, GDP expanded an average of 5.9% in the 2005-2012 period, which is well below the 6.7% increase that the old data showed.
In the full year 2013, GDP expanded 3.0% (2012: +0.9%), thus confirming the initial estimate that Finance Minister Axel Kicillof reported on 27 March. The reading was met with suspicion as it fell slightly short of the 3.2% GDP growth threshold that would have triggered government payments of around USD 3.5 billion to GDP warrant holders.
While the new GDP figures more closely reflect private analysts' estimates, there is still a discrepancy between official and non-official figures. LatinFocus Consensus Forecast panelists expect official GDP to experience flat growth this year, which is down 0.2 percentage points from last month's forecast. For 2015, participants expect official GDP to grow 1.2%. Additionally, LatinFocus panelists expect non-official GDP to experience a 1.5% contraction in 2014 and to expand a meager 0.7% in 2015.