Argentina’s economy expected to continue recession in second quarter

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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 decline as the recession deepens under libertarian President Javier Milei’s harsh austerity policies.

That median GDP estimate from 15 analysts polled by Reuters for the April-June period would follow a 5.1% annualized contraction in the first quarter. Official data is due to be released on Wednesday.

Milei’s cost-cutting has hurt economic activity and increased poverty and unemployment. The government says it is needed to rein in triple-digit inflation, rebuild reserves and reverse years of deep budget deficits.

The South American country entered a technical recession in the first quarter of the year, with two consecutive periods of quarter-on-quarter GDP contraction.

“We are still in a recession, but there are signs that it is over,” said analyst Marcelo Rojas, citing signs that the country’s economic crisis has reached its lowest point.

“GDP can still grow a lot, but new capital is needed to generate momentum.”

Argentina has seen some industries recover faster than others, with key agriculture performing strongly, along with oil and gas from the vast Vaca Muerta shale region. Construction and consumption remain weak.

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

He added that wages outperformed inflation in the second quarter and that Argentines’ purchasing power could continue to improve as monthly price increases slow, which could boost consumption in the second half of the year.

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

Analysts’ Q2 year-on-year GDP forecasts ranged from a 1.4% decline, the most common estimate, to a 3.7% decline. The median estimate was for a 1.8% contraction.

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

(Reporting by Hernan Nessi; Writing by Brendan O’Boyle; Editing by Cynthia Osterman)

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