World Economic outlook - Argentina Q2 economy 2012 : Argentina's economy hit a wall during the second quarter, contracting due to slack growth in top trading partner Brazil and government polices that disrupted activity.
Second-quarter gross domestic product slumped 0.8% on the quarter and was unchanged on the year, the national statistics agency, Indec, reported Friday.
That came in significantly lower than the already-weak expectations. Analysts had predicted the government would report a light expansion of 0.9% on the year.
It also marks an abrupt slowdown for an economy that expanded 8.9% last year.
Lower demand for Argentine industrial goods in Brazil and government restrictions on imports and the foreign exchange market have taken the wind out of the sails of Argentina's once fast-growing economy.
In addition, the Argentine economy's true rate of growth is thought to be somewhat less than what official data shows because the government is widely believed to understate inflation.
The country's statistics have been the target of skepticism since early 2007, when then-President Nestor Kirchner replaced long-serving staff at the national statistics agency, Indec, with political appointees.
Indec's consumer price index put 12-month inflation at 10% in August, while a survey of a dozen economists published by opposition members of Congress produced an average estimate of 24.3% annual inflation that month.
While the second-quarter GDP report was grim, most economists are optimistic that the economy has touched bottom and is set to post better growth next year thanks largely to greater demand for Argentine goods in Brazil and expectations for a record soybean crop at home.
The economy will grow 3.4% this year and 4.4% the next, according to the 2013 federal budget submitted to Congress this week.
The budget foresees annual economic growth in the neighborhood of 4% or slightly higher through 2015, relatively strong, but much lower than the average rate of around 7% since 2003, according to government data.
Industrial production has started to recover, led by rising output in the auto sector in July and August.
Farmers are also expecting a wet 2012-13 season thanks to the El Nino weather pattern, which analysts say should produce a record soybean harvest next year. High global prices for soy and grains could bring billions of additional dollars into the country.
Argentina is the world's leading exporter of soymeal and soyoil, ranks No. 2 in corn exports and is No. 3 in soybean exports.
Based on current prices and harvest forecasts, soybean exports will rise to $35 billion from the $20 billion shipped this year, according to Jefferies & Co. Managing Director Siobhan Morden. Soy exports alone could contribute around 2.2 percentage points to GDP growth in 2013, Ms. Morden said in a recent report.
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