Dryness that’s parching soybeans and corn across Argentina’s Pampas crop belt will shave US$4.8 billion off the nation’s gross domestic product this year, according to one of the first analyses of the economic impact of the drought.
The estimate, made by the Rosario Board of Trade, means that Argentina is poised to lose out on one percent of GDP as less revenue for farmers results in “less freight, less financial and intermediation services, and less consumption.” A December survey of economists by the Central Bank, carried out before the drought had fully gripped the Pampas, saw the economy growing 2.9 percent in 2022.
The hit to growth comes as Argentina is negotiating a new programme with the International Monetary Fund to reschedule US$40 billion of payments owed to the lender. Economic growth, and the pace of narrowing the fiscal deficit, have emerged as key disagreements between the IMF and Argentina.
Plants still have weeks to grow and, with the La Niña-fuelled drought set to last until March, harvest forecasts may continue to plunge, deepening the broader economic damage. Still, rains have fallen in recent days, which may improve the outlook in some areas.
Net soy and corn exports are now set to be worth US$2.7 billion less than Rosario was predicting in September, a figure that’ll be closely watched by the nation, which needs crop export dollars to protect the peso. Soybeans, handily Argentina’s most valuable export crop, are harvested in the second quarter.
by Jonathan Gilbert, Bloomberg