Argentina’s economy forecasts prolonged recession in second quarter By Reuters

By Hernan Nessi

BUENOS AIRES (Reuters) – Argentina’s economy likely shrank 1.4 percent in the second quarter from a year earlier, a Reuters poll showed on Monday, the fifth such decline, as the recession deepens under a tough stimulus of austerity by the libertarian president Javier Milea.

That average GDP estimate of 15 analysts polled by Reuters for the April-June period would follow a 5.1 percent year-on-year decline in the first quarter. The official data is published on Wednesday.

Mile’s cost-cutting affected economic activity and increased poverty and unemployment. The government says it needs to tame triple-digit inflation, rebuild reserves and reverse years of deep fiscal deficits.

The South American country entered a technical recession – two consecutive periods of quarterly GDP contraction – in the first quarter of the year.

“We are still in recession, but there are some signs that it may be coming to an end,” analyst Marcelo Rojas said, referring to signs that the country’s economic downturn may have bottomed out.

“GDP has plenty of room to grow, but new capital will be needed to generate momentum.”

In Argentina, some industries bounced back faster than others, with the key agricultural sector performing strongly, along with oil and gas in the massive Vaca Muerta shale region. Construction and consumption remain weak.

“Agriculture, energy and mining are showing solid rates of recovery. In contrast, construction, financial intermediation and trade are showing significant declines,” said Pablo Besmedrisnik, economist at VDC consultancy.

He added that wages gained ground against inflation in the second quarter and that with monthly price increases slowing, the purchasing power of Argentines could continue to improve, boosting consumption in the second half of the year.

Monthly inflation has fallen from 25% in December to around 4% in recent months. Annualized inflation remains above 250%, the highest in the world, although the government plans to reduce it sharply by the end of the year.

Analysts’ forecasts for annual GDP ranged from a 1.4% drop, the most common estimate, to a 3.7% drop. The average estimate was for a contraction of 1.8%.

Mile’s government presented its 2025 budget on Sunday, which included a target for GDP growth of 5 percent next year.