Country Economic Forecasts > Argentina

The first release of the new monthly GDP-proxy series since the overhaul of the national statistical office showed that the Argentine economy contracted by 2.8% y/y in Q2, whereas we had forecast a drop of 2%. We believe that most of the weakness stems from declining private and public consumption on the back of a squeeze in real wages and the temporary paralysis of public works as auditing procedures are improved. We now expect the economy to contract by 0.8% in 2016, whereas last month we forecast -0.4%.The government has run into significant political opposition, with the Supreme Court ruling that the government should have carried out public hearings before it raised gas prices earlier this year, and that these must be held if the price rises are to be legalised. This is a major challenge to the government's plan to rein in the fiscal deficit, albeit we expect this setback to be overcome within a few months.