Argentina GDP contracts in Q1 on high inflation, Brazil weakness

Nathan Andrada – Fourth Estate Cooperative Contributor

Buenos Aires, Argentina (4E) – Argentina’s economy surprisingly slid into contraction for the first time in nearly two years as the country faces high inflation as well as weak exports to neighboring Brazil.

In the January to March quarter, gross domestic product (GDP) dropped 0.8 percent on the quarter and contracted by 0.2 percent on the year, according to the national statistics agency Indec’s report released Monday. The economy grew 1.4 percent in the final quarter of 2013 following the introduction by the government of a new base year for calculating growth.

The economy is hit by weakness in Brazil and tighter monetary policy as the government seeks to contain rising inflation and pressure on the exchange rate after years of significant growth in monetary supply.

The contraction in the first-quarter GDP was primarily due to the 6.4 percent fall in exports, 3.2 percent slide in construction activity and 1.2 percent drop in private consumption.

In the first quarter, South America’s second-largest economy recorded a current account deficit of $3.3bn, the largest shortfall since 1999, according to Indec.

Argentina’s international reserves have shrank by 25 percent in the past year to $28.9bn while consumer prices have climbed by 12.9 percent in the January to May period of this year.

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