Argentina’s economy craters in Q2 as economic crisis grips the country

Argentina’s
President Macri arrives for a news conference in Buenos
Aires
Thomson
Reuters

• Argentina’s gross domestic product fell 4.2% in
  the second quarter from a year earlier.
• Argentina was hit by a severe drought that has weighed
  on exports.
• The government is pursuing austerity measures to shore
  up public financing.

Argentina’s economy contracted sharply in the second quarter
after a severe drought roiled agricultural production and as the
country works with the International Monetary Fund to
stem a spiraling economic
crisis.  

Gross domestic product fell 4.2% between April and June
from a year earlier, the national statistics agency said in a
report, marking its first contraction in more than a year. One of
the worst droughts in years helped drive a steep decline in
exports from the country, a top seller of soy and corn in the
world market. 

“The economy will contract further in upcoming months amid
tightening monetary and fiscal conditions, though the expected
rebound in agricultural output will prevent a deeper
contraction,” the ratings agency Moody’s said in a
statement.

President Mauricio Macri asked the International Monetary
Fund last month to speed up payments that are part of a historic
bailout deal reached in June. The IMF has so far extended $15
billion to the country and was expected to disburse an additional
$3 billion in September. 

Also on Wednesday, the Economy Ministry
said Argentina’s primary fiscal deficit stood at $572.1
million in August, down about 58% from the same month last
year. 

Argentina has been pursuing sweeping austerity measures in
efforts to shore up public finances. President Mauricio Macri
and Finance Minister Nicolas Dujovne rolled out a series of
economic reforms earlier this month, including stiff spending
cuts and export tax increases. 

The central bank raised its benchmark interest rate to 60%
in August after the peso, which has shed about half of its value
this year and is the worst-performing currency of
2018, continued to sell off.