Argentina: Activity Shrinks during Q4

Figure 1: Argentina’s GDP (2019 = 100, Seasonally Adjusted)

Source: INDEC and Continuum Economics

Argentine National Statistics Institute (INDEC) revealed the GDP figures for the last quarter of 2022. In line with other activity indexes (here), the GDP figures shows a strong contraction during the last quarter of 2022 as the Argentine economy shrinks 1.5% during the quarter. During 2022, Argentina grew 5.2%, with this growth being high influenced by a weak 2021. This figures reveals that in the absence of the Covid-19 re-opening, which guaranteed some growth in 2022, Argentina is likely to struggle in the presence of its many macroeconomic imbalances.

All the demand components contracted during Q4 with the exception of exports. Private consumption reduced 1.5%, affected by the high rates of inflation which reduced real wages. Investment contracted 7.2% revealing a strong pessimism of investors over the Argentine economy. Imports have contracted 8.2% affected by the weaker demand and the import restrictions used by the BCRA to avoid the dollar droughts. Exports grew 8.7% but may have been affected by the “Soybean Dollars” (here) as several soybeans producers were avoiding exporting their grains advocating for a better exchange rate and used the program to liquidate their exports at a better exchange rate.

The contraction reveals a gloomy outlook for the Argentine economy. As demand is already showing weakness there might have little room to grow in 2023. Additionally, severe droughts are affecting Argentine rural areas, which will diminish grain exports during the year and thus reduce dollar absorption by the BCAR, exacerbating the Argentine imbalances. We believe inflation will continue to be high in Argentina during 2023 affecting household consumption and we are forecasting a zero growth for Argentina in 2023 with downside risks.