Economic growth records best result since Q2 2022 in Q3

GDP outpaces its past-decade average: The economy continued to perform strongly in the third quarter: GDP growth inched up to 4.1% year on year from the upwardly revised 4.0% in the second quarter, marking the best result since Q2 2022 and remaining above the 2014–2023 average of 1.1%. On a seasonally adjusted quarter-on-quarter basis, economic growth slowed markedly to 0.6% in Q3, following the previous period's 2.3% expansion.

Fixed investment spearheads the result: Domestically, fixed investment was the main driver of the uptick, possibly supported by past central bank interest rate cuts, rebounding 1.4% in Q3 (Q2: -2.5% yoy). Capital outlays in the construction sector accelerated, particularly on roads and energy infrastructure. That said, higher inflation in Q3 dented household spending growth, which ticked down to an over three-year low of 0.8% (Q2: +1.0% yoy). Finally, government spending growth softened to 3.0% in Q3 (Q2: +4.3% yoy). On the external front, exports of goods and services expanded at a weaker pace of 11.8% in Q3 (Q2: +14.9%), though growth remained high by historical standards due to improvements in soy exports as the country recovers from 2023’s drought. Meanwhile, imports of goods and services dropped at a more moderate rate of 3.1% in Q3 (Q2: -3.3% yoy), marking the best reading since Q4 2023.

GDP outlook: Looking ahead, our panelists forecast GDP to expand around Q3’s rate in Q4 as a post-drought recovery in the agricultural sector boosts government spending—by increasing tax revenue—and exports. That said, our panel expects the economy to expand less quickly in 2025 than in 2024 as exports growth normalizes. A stronger-than-expected La Niña weather event damaging crop yields is a downside risk.

Panelist insight: On the 2025 outlook, EIU analysts stated: “The economy will slow as the growth in real salaries and employment cools, which partly reflects a stall in the disinflation process. Investment will be subdued as the monetary easing cycle of the central bank also slows. Growth will be supported by strong inbound tourism, especially from Argentina, bolstering private consumption and the services sector.”

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