By Hernan Nessi
BUENOS AIRES (Reuters) – Argentina’s economy likely entered a technical recession – two straight quarters of economic contraction – in the third quarter, a Reuters poll of analysts showed on Thursday, with an expected 0.7% contraction hurt by lower grains sales.
The South American country’s GDP would have contracted in the July-September period between 0.3% and 1.4%, the forecasts from 12 analysts showed, hit by lower consumption and a drop in industrial activity. The economy shrank 4.9% a quarter earlier.
Argentina, which ushered in a new government last week, is battling likely stagflation on the horizon, a toxic mix of triple-digit inflation and recession that will likely squeeze people and push up the poverty rate, already at over 40%.
The economic picture also likely darkened further at the end of the year, analysts said, with the political uncertainty that surrounded the October-November elections and recent sharp devaluations of the peso currency.
“October-November were complex months for the economy, with the readjustment after the August devaluation and the uncertainty of the elections,” said Federico González Rouco, economist at Empiria consultants.
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He said the Q3 decline was due to a major drought that hit the key grains sector, along with weaker consumption and obstacles to imports that have been snarled by tight capital controls and a lack of foreign currency reserves.
Argentina, the third largest economy in Latin America, is going through a complicated financial situation, with 160% inflation, negative net central bank reserves and a “debt bomb” owed to local and global creditors.
Argentina’s official statistics agency will publish GDP data for the third quarter on Friday at 4 p.m. (1900 GMT).
(Reporting by Hernan Nessi)