Argentina’s economy contracted in the second quarter after a drought slashed agricultural production, according to the estimate released Wednesday by Argentine statistics agency Indec.
The economy shrank 4% in the three months ended in June compared with the previous three-month period, and contracted 4.2% compared with the second quarter of 2017, Indec said.
The administration of President Mauricio Macri said earlier this week it expects gross domestic product to shrink 2.4% this year amid a fiscal crisis that has forced the government to slash some kinds of spending. A drought at the beginning of the year slammed soybean and corn production, which account for a big part of exports, hitting growth before the fiscal crisis even started.
“The second quarter is when we harvest soybeans and corn, so there was a big drop in agricultural production,” said Fausto Spotorno, director of the Buenos Aires-based Center for Economic Studies. “That really hurt growth in the quarter.”
More bad news followed the drought. A selloff of the peso in May forced Mr. Macri to seek help from the International Monetary Fund, and the government agreed to cut spending as part of a $50 billion bailout from the IMF, including outlays on public works. The weaker peso also put pressure on inflation, boosting prices and further depressing demand in the economy.
Earlier this month, the government was forced to ask the IMF to speed up disbursements from the agreement after the peso dropped again against the dollar, and Finance Minister Nicolas Dujovne announced a series of austerity measures intended to cut the budget deficit even more quickly.
Government spending fell 2.1% from the first quarter and was unchanged compared with the second quarter of 2017. Exports plunged in the second quarter, dropping 14.2% from the previous three-month period and falling 7.5% from a year earlier, while agricultural output plummeted 31.6% from a year earlier.
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