Argentina: Recovery carries over into Q4, albeit at a softer pace
GDP contracted 4.3% year-on-year in the fourth quarter of last year, moderating from the 10.1% slump recorded in the third quarter, as the economy gradually continued to recover from the blow dealt by the health crisis.
Nevertheless, the pace of contraction was still significant, reflecting the ongoing impact of the Covid-19 pandemic on both domestic and external activity. Private consumption fell at a milder yet still-pronounced rate of 8.1% year-on-year in Q4 (Q3: -14.6% yoy), amid downbeat consumer sentiment and an ailing labor market. Meanwhile, the contraction in public spending softened from 6.7% in Q3 to 2.6% in Q4, while fixed investment rebounded and grew 15.9% in Q4 (Q3: -9.0% yoy), although this was partly due to a very low base effect.
On the external front, exports of goods and services nosedived 32.5% in Q4 following Q3’s 17.1% slump, amid still-muted global demand and disrupted supply chains. Meanwhile, imports of goods and services declined at a milder pace of 2.8% in Q4 (Q3: -21.6% yoy), owing to a less pronounced contraction in domestic demand.
On a quarterly basis, economic activity expanded 4.5% in Q4, following the previous quarter’s 13.1% jump.
The economy is set to recover some of last year’s losses in 2021, thanks to a rebound in domestic demand and a reviving global economy amid the gradual removal of restrictions. However, soaring inflation, macroeconomic imbalances and capital controls will weigh on activity. Prolonged debt renegotiations and a slow vaccine rollout cloud the outlook.