Argentina economic activity seen plunging 6% in February- Reuters poll

By Thomson Reuters Apr 22, 2024 | 1:30 PM

By Hernan Nessi

BUENOS AIRES (Reuters) – Argentina’s economic activity likely plunged 5.9% year-on-year in February, a Reuters poll of market analysts showed on Monday, which would make a fourth straight monthly slide amid tough austerity measures under new libertarian President Javier Milei.

The expected slide underscores the impact of Milei’s cost-cutting on the real economy, even as it helps to boost the government’s fiscal position after years of deficits and to rebuild depleted central bank reserves.

According to the mid-April poll, the 11 analysts estimated declines for the month ranging from 4.1% to a maximum 7.1% year-on-year, with stronger farming and mining activity offset by a sharp slide in consumption, manufacturing and construction sectors.

“Agriculture – helped by a low comparison base – and mining showed healthy growth rates, while sectors such as commerce, industry and construction are in strong contractionary phases,” said consulting firm Orlando Ferreres & Asociados.

Milei’s austerity plans included slashing the size of government, trimming back subsidies for fuel and transport, shutting state institutions, and auditing welfare schemes.

He is racing against the clock to fix one of the worst economic crisis in decades, balancing the need to stabilize the state’s finances while avoiding social unrest as tensions boil over high inflation that has hit spending power amid rising poverty.

Pablo Besmedrisnik, economist and director of consulting firm Invenómica, said private consumption would remain weak, which along with a slide in state spending would weigh on activity in the months ahead.

A decline in activity in February, if confirmed when the official data is released on Tuesday, would follow declines of 4.3% in January and 4.5% in December. The activity index data is a useful precursor to GDP figures.

Eugenio Marí, Chief Economist of the Libertad y Progreso Foundation, saw some light at the end of the tunnel with some signs inflation – running at near 300% annually – is slowing.

“We estimate economic activity will hit its bottom in March,” he said.

“Starting in April, economic activity will begin to recover, led by some economic sectors, mainly exporters. Together with the slowdown in inflation, this will open the door to a recovery in the purchasing power of salaries and pensions.”

(Reporting by Hernan Nessi; Editing by Adam Jourdan and Aurora Ellis)