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Argentina GDP Q2 2023

Argentina: GDP records sharpest contraction since Q3 2020 in the second quarter

GDP contracted 4.9% year on year in the second quarter, contrasting the 1.4% expansion seen in the first quarter. Q2’s reading marked the worst result since Q3 2020. The downturn was broad-based, with private consumption, public spending, fixed investment and exports all weakening.

Private consumption growth fell to 0.8% in Q2, marking the weakest expansion since Q1 2021 (Q1: +4.9% yoy). Public spending growth ebbed to 2.6% in Q2 (Q1: +2.8% yoy). Meanwhile, fixed investment slid at a steeper pace of 1.1% in Q2, below the 0.3% contraction in the prior quarter.

On the external front, exports of goods and services contracted 10.9% in Q2, hit by a severe drought and marking the worst reading since Q4 2020 (Q1: -4.1% yoy). In addition, imports of goods and services growth softened to 4.3% in Q2 (Q1: +5.1% yoy).

On a seasonally adjusted quarter-on-quarter basis, economic activity dropped 2.8% in Q2, contrasting the previous quarter’s 0.9% growth. Q2’s reading marked the largest decrease since Q2 2020.

GDP has likely continued to fall in Q3, buffeted by a protracted drought, hyperinflation, FX restrictions, a plunging peso, rocketing interest rates and heightened political uncertainty. The Central Bank devalued the peso by around 18% after outsider libertarian candidate Javier Milei emerged victorious in the 13 August presidential primary.

Argentina’s economic situation is further complicated by a U.S. court deeming the country liable to pay damages of about USD 16 billion to previous minority shareholders of the now-nationalized oil and gas company YPF on 8 September. Although the government will appeal the decision, the ruling compounds concerns over the country’s fiscal solvency and could put downward pressure on the currency ahead.

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