Argentine economy likely already in recession, analysts say

investing.com:

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.

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