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WRAPUP 2-Argentina GDP improves but still weak in third quarter
December 21, 2012 / 8:10 PM / 5 years ago

WRAPUP 2-Argentina GDP improves but still weak in third quarter

* GDP data comes in below expectations

* Activity index had put 3rd-qtr growth at 1.4 pct yr/yr

* Current account shifts to surplus in third quarter

* November trade surplus bigger than expected

By Hilary Burke

BUENOS AIRES, Dec 21 (Reuters) - Argentina’s economy rebounded slightly in the third quarter after showing zero growth in the previous period, but the weak data will further dishearten creditors holding the country’s growth-linked GDP warrants.

Third-quarter gross domestic product grew 0.7 percent from a year ago, well below the 1.4 percent increase indicated by the country’s EMAE monthly economic activity index.

GDP rose 0.6 percent in the third quarter versus the second quarter and accumulated a 3.2 percent increase in the 12 months through September, the government said on Friday.

The GDP warrants, issued during the country’s 2005 and 2010 debt restructurings, only pay out when growth tops a certain threshold. If 2012 growth exceeds 3.26 percent, Argentina will have to pay roughly $4 billion on the warrants in December 2013 .

Argentina’s government foresees 3.4 percent growth this year, according to the 2013 budget, but most analysts expect it to report a smaller expansion.

“For official real GDP to increase in 2012 above the 3.26 percent threshold, official real GDP needs to grow close to 7.5 percent in annual terms during Q4 2012, something we believe is extremely unlikely,” Citigroup analyst Joaquin Cottani wrote in a research note.

The South American country has been widely accused of manipulating inflation data and, to a lesser extent, growth data. As a result, it faces potential sanctions by the International Monetary Fund.

No one disputes, however, that growth in Latin America’s No. 3 economy has slowed sharply this year. Sluggish global demand, high local inflation, a poor grains harvest and government import and currency controls have all taken a toll.

Private consumption rose 2.1 percent year-on-year in the third quarter, down from 4.2 percent in the second quarter, the government said.

Meanwhile, gross fixed domestic investment fell 3.5 percent from a year earlier, improving from the 15 percent drop seen in the second quarter.

From April through June, GDP grew 0.0 percent year-on-year and contracted a revised 0.9 percent versus the first quarter.

“For 2013, we expect both non-official and official real GDP growth to be 3 percent,” Cottani said. “We believe that now that growth is likely to hover close to the thresholds that would trigger GDP warrants payments, the government will eventually abandon its ‘optimistic’ growth accounting practices.”


Also on Friday, the government reported that the current account balance of payments showed a $1.13 billion surplus in the third quarter, compared with a revised $214 million deficit a year earlier.

The current account is the broadest measure of a country’s foreign transactions, encompassing trade, services and an array of financial flows, including interest payments.

Separately, the government said the November trade surplus widened by 74 percent from the same month a year ago to $634 million.

The figure came in well above the $430 million median forecast given in a Reuters poll of ten analysts.

November’s exports fell 2 percent year-on-year to $6.46 billion, while imports shed 6 percent to total $5.83 billion.

From January through November, the trade surplus totaled $12.16 billion, up 26 percent from the same period last year thanks largely to tough new import rules imposed in February.

In November 2011, the country’s trade surplus totaled $364 million.

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