Argentina’s economy: Shrinking

Posted: June 27, 2014 in economy
Tags: , ,

 

AMID the adulation of Lionel Messi and the angst over the country’s ongoing battle with its holdout creditors, it was easy to miss another piece of news from Argentina this week. On June 23rd the country’s statistics agency announced that Argentina’s economy had officially entered recession, shrinking by 0.8% in the first quarter of 2014 after a 0.5% contraction in the final quarter of 2013. Many economists are expecting the first calendar-year recession since Argentina’s devastating 2001-2002 financial crisis.The economy’s contraction can be attributed largely to a devaluation of 20% in January, accompanied by interest-rate hikes. That subdued output and spurred on inflation, predicted to reach almost 40% by year-end. For Miguel Kiguel of EconViews, a consultancy, expectations of devaluation also played their part, by pulling some economic activity into 2013: “People stocked up on durable goods such as cars, and they were smart to do so given that prices have since spiked and the peso has lost value.”Many of Argentina’s problems are familiar. Inflation has plagued Argentina for much of the past decade; it still grew by an average of 5.6% from 2005-2013. Exchange and trade controls have long made it hard to get hold of primary materials, stifling production. But whereas in the past Argentina could maintain growth by propping up the peso and consumers’ purchasing …

via Economic Crisis http://ift.tt/1lVQSbb

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