Argentina’s economy experienced growth exceeding expectations in December, attributed in part to a record wheat harvest that mitigated the repercussions of a significant midterm election. Economic growth increased by 1.8 percent in December relative to November, as reported on Tuesday, following a contraction of 0.3 percent in November for South America’s second-largest economy. Compared to the previous year, the economy expanded by 3.5 percent, significantly exceeding the projected zero growth from economists. The agricultural and financial sectors made substantial contributions to economic growth in the final month of the previous year, whereas manufacturing and retail experienced declines.
Argentina’s vital agriculture sector experienced a notable 32 percent year-on-year growth. “After two months in which the economy performed worse than expected, December was very strong,” stated Maria Castiglioni. “Clearly, agricultural activity contributed significantly.” Following a significant setback in the Buenos Aires Province elections last September, President Javier Milei’s party experienced a remarkable resurgence with a decisive midterm victory the subsequent month. Argentine markets experienced a decline in anticipation of the national election in October, as investors positioned themselves for a potential setback.
In the third quarter, a majority of sectors accelerated production in anticipation of a potential post-election devaluation, which subsequently led to a deceleration in economic activity during October and November. “The manufacturing industry continues to face challenges.” Sebastian Menescaldi stated “The upside is that the agricultural cycle is independent of the election.” The data is likely to offer a degree of reassurance to President Javier Milei’s administration and enhance optimism regarding his macroeconomic program. However, several factors anticipated to support robust growth this year – including credit momentum and real exchange rate depreciation – now appear poised to offer a more modest impetus,” stated Jimena.
Overall economic growth exhibited sluggishness last year, with monthly activity increasing by a mere 0.02 percent during the first 11 months, as indicated in a research note released by Goldman Sachs Group Inc on Tuesday. The labour market exhibited signs of stagnation, characterised by a decrease in higher-paying formal employment, which was largely offset by an increase in informal sector positions. In January, monthly inflation accelerated for the fifth consecutive month, reaching 2.9 percent, primarily driven by increases in prices for food, restaurants, hotels, and utilities. Annual inflation is projected to moderate to 22% this year, while economic growth is anticipated at 3.2 percent, based on the insights of economists surveyed by the Central Bank last month.