Argentina Overhauls GDP Data, Confirming Economy in Recession

  • Statistics agency revises economic growth for past 10 years
  • Economy contracted for past three quarters, new data show

Argentina unveiled the results of revised growth numbers for the past decade as the government of President Mauricio Macri seeks to restore investor confidence undermined by the previous administration. The data confirmed that the new president inherited an economy in recession.

Gross domestic product shrank 0.7 percent in the first quarter from the last three months of 2015, its third consecutive quarter-on-quarter contraction, the national statistics agency said. GDP expanded 0.5 percent in the first three months of the year from a year earlier. The median estimate of six economists surveyed by Bloomberg was for a 1 percent year-on-year contraction.

“Statistically we know that two consecutive quarters of contraction is a recession but after that it passes for analysis in the Finance Ministry,” Fernando Cerro, technical director of the statistics agency, said at a news conference in Buenos Aires.

President Macri, who assumed office in December, ordered an immediate overhaul of the country’s statistics agency as part of his efforts to open up the economy and attract foreign investment. Argentina, which is preparing to once again to allow the International Monetary Fund to conduct an Article IV review and is hoping to become a member of the Organization for Economic Cooperation and Development, in 2013 became the first country to be censured by the IMF for publishing inaccurate data.

Indec, as the statistics agency is known, released revised figures for GDP between 2004 and 2015 after its calculation consistently diverged from private estimates. The new calculations showed the previous series overestimated growth by 18 percent, Cerro said.

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The inaccuracies were most pronounced during years when the new series finds that the economy contracted. For example, in 2009 the revised calculations show the economy contracted by 6 percent compared to an estimate of 0.1 percent growth under the previous government. The economy shrank 2.6 percent in 2014 even though the previous government said it grew 0.5 percent.

Argentina’s economy is faltering after Macri devalued the peso and removed utility bill and transport subsidies, prompting a slump in the peso and leading the central bank to raise interest rates. Annual inflation has soared to more than 40 percent, while investment has declined. Macri has said the economy will return to growth in the second half of the year.

The government is offering to buy back $13.8 billion of GDP warrants that were issued as part of debt restructurings in 2005 and 2010 as sweeteners for creditors who lost out after the country defaulted on $95 billion of debt in 2001. The government said it could save $9.4 billion if all of the securities, which pay out if the economy expands by more than 3 percent in a year, are repurchased.

The government sees no additional warrant payments from the revised growth numbers, a Finance Ministry official said.

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