Q2 GDP will be released on September 22. Except for mining and teaching, which together account for less than 10% of the GDP, all the rest of the sectors posted contractions. The most negative impact came from manufacturing, followed by construction, retail sales, agriculture, and transport.
From May to July activity posted positive m/m figures, but we expect activity to turn to the negative m/m territory in August as the government was forced to pause the reopening process in mid-July. Keep in mind, however, that despite the monthly activity expansions registered in May-July, y/y figures remained to show double-digit contractions across most sectors.
While we still believe the economy reached a bottom in Q2, with the loss of momentum of late we are less optimistic about the speed of the recovery from Q3 onwards. We are now expecting a -13% y/y figure for Q3 and -11% for the full year. Recall that Argentina is the LatAm country where the COVID-19 situation is worsening at the fastest speed.
For 2021 we believe the economy will continue to struggle in H1, especially since distortions introduced by government policies delay some effects of the pandemic to 2021. Assuming a vaccine becomes available by summer 2021, the recovery should gain steam in H2 2021. Yet with the distortions present in the economy, including multiple FX rates and artificially low inflation, we do not believe the economy will return to pre-pandemic levels of activity before 2023.