Economy

Argentina sees GDP grow above expectations in the 2nd quarter; political crisis can hinder the 3rd

This Wednesday, the country will pay nearly $1.9 billion to the International Monetary Fund

Casa Rosada, Argentina's Presidential headquarter, in Buenos Aires, 29/10/2019. Photo: REUTERS/Carlos Garcia Rawlins
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Argentina‘s economy jumped 17.9% in the second quarter year-on-year, above the forecast by economists, in a strong recovery after the significant contraction suffered in the same period in 2020 when the economy was highly affected by the impact of the COVID-19 pandemic.

The annual growth was the highest recorded in recent years and was above the median of analysts’ projections of 17.3%. In comparison with the previous quarter, however, the Argentine economy shrank 1.4%.

“The strong recovery was driven by the construction sector, which was flying in the second quarter,” said Lucio Garay Mendez, an economist at EcoGo consultancy, adding that growth was affected by the tightening of restrictions related to COVID-19 in the quarter. “This was a result of heightened restrictions on mobility with the arrival of the second wave,” he said.

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In recession since 2018, the country, a major exporter of grains and meats, is also having to deal with a new political crisis of the center-left government of Alberto Fernández. Since the government’s defeat in the primaries on September 12, the conflict between Fernández and Vice President Cristina Kirchner has heated up and threatens the country’s governability. Measures taken by Fernández since the weekend, fulfilling part of Cristina’s wishes, eased the situation, but only temporarily.

On Tuesday morning, for example, the government unveiled plans to loosen restrictions on the pandemic, including gradually easing tight border controls in an attempt to revive economic activity — and please part of the political class. and voters tired of restrictions.

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This Wednesday, the country will pay nearly $1.9 billion to the International Monetary Fund (IMF), according to two government sources and the state news agency Telam, in repayment of a debt with the organization, which totals $45 billion.

The payment will be made using $1.8 million in funds Argentina received from the IMF’s Special Drawing Rights (SDRs) program distributed in August to help members of the global institution fight the economic consequences of the coronavirus pandemic. SDRs represent foreign currency assets.

Argentina is required to make a payment to the IMF of $400 million for November’s interests and about $1.9 billion for the principal debt of December, in line with a schedule of its debt obligations.

The South American country is in talks with the Fund to restructure its debt at a time when its economy has been hampered by persistently high inflation and rising poverty, problems aggravated by the ongoing pandemic.

(Translated and co-written by LABS)

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