Argentina: GDP slides at a more pronounced pace in Q4
GDP contracted at a steeper pace of 1.4% year on year in the fourth quarter, below the 0.8% contraction logged in the third quarter. On a seasonally-adjusted quarter-on-quarter basis, economic activity contracted 1.9% in Q4, contrasting the previous quarter’s 2.2% expansion.
The downturn was broad-based, with private consumption, public spending, fixed investment and exports all contracting.
Private consumption contracted 1.5% in Q4, marking the worst result since Q4 2020 (Q3: +0.2% yoy). Government spending dropped 3.2% (Q3: +2.1% yoy), while fixed investment shrank 6.8% in Q4, marking the worst result since Q3 2020 (Q3: +1.0% yoy). Exports of goods and services fell 6.3% on an annual basis in the fourth quarter, which was below the third quarter’s 4.7% contraction. In addition, imports of goods and services deteriorated, contracting 1.8% in Q4 (Q3: +2.1% yoy).
Q1 should register an even sharper sequential drop amid President Milei’s macroeconomic adjustment plan, as indicated by depressed consumer sentiment in January-February and falling industrial output in January. Meanwhile, in January-February, the government recorded two consecutive first monthly fiscal surpluses, which bodes well for macroeconomic stability going forward.
Commenting on the risks surrounding the outlook for 2024, Credicorp Capital’s analysts stated:
“The year 2024 continues to be fraught with uncertainty, due to the high levels of inflation at the beginning of the year impacting household purchasing power. Risks remain tilted to the upside, considering the process of relative prices adjustment, the characteristic high persistence in the economy, uncertainty about the dismantling of capital controls, and governance tensions that hinder fiscal consolidation efforts.”