Argentina’s economy contracted more than expected in December even after the country won its much-celebrated third World Cup title, confirming the view that the nation will likely enter recession later this year.
Economic activity declined one percent in December from November, the fourth straight month of declines, according to government data published Thursday. From a year ago, activity dropped 1.2 percent, worse than economists’ expectations for 0.9 percent growth and the first negative annual print since early 2021.
The economy’s poor performance in December dispels any hopes that Argentina’s World Cup victory during the month, the first in 36 years, would boost growth. Other countries that won the tournament saw growth pick up after winning, according to one study.
“The surprising plunge in December Argentine activity will end a five-quarter streak of robust expansion, and lowers the impulse for 2023 growth. Along with slashed soybean production projections, that may raise pressure for policy stimulus ahead of the October election," said Adriana Dupita, Bloomberg's Latin America economist.
Although the government expects two percent annual growth this year, economists surveyed by the Central Bank see gross domestic product expanding only 0.5 percent in 2023. Analysts also forecast that the economy contracted for two straight periods on a quarterly basis at the end of 2022 and the start of this year, constituting a recession.
Annual inflation near 99 percent is wiping out wage growth for millions of Argentines, while a severe drought is wilting the country’s soy crop that’s crucial for exports, tax revenue and economic growth.
The deteriorating economic situation is expected to have a significant impact on the October presidential elections, with candidacies started to be discussed in the two main party coalitions.
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by Patrick Gillespie, Bloomberg