Argentina’s economy expanded in August despite a steep currency devaluation that unleashed price spirals not seen in three decades.
Economic activity grew 1.3 percent in August from a month earlier, according to government data published Tuesday. From a year earlier, the gross domestic product proxy rose 0.3 percent, compared with economists’ median estimate for a 2.2 percent decline.
The upset victory of outsider Javier Milei in mid-August’s presidential primary election sent the country’s peso, bonds and stocks into free fall and prompted the incumbent government to devalue the official currency 18 percent and raise the key interest rate 21 percentage points. Monthly inflation in August accelerated 12.4 percent, a level not seen since Argentina was exiting hyperinflation in the early 1990s.
A general election Sunday saw Economy Minister Sergio Massa replace Milei on top, making for a worst-case scenario for markets ahead of the November runoff. The next government is expected to inherit a recession coupled with triple-digit inflation.
Argentina’s gross domestic product slumped 2.8 percent in the second quarter, the deepest decline since the peak of the pandemic in early 2020. A record drought that wiped out US$20 billion of agriculture exports and accelerated food inflation took a heavy toll on the economy. Economists surveyed by the Central Bank see GDP declining 2.8 percent this year and contracting again in 2024.