Argentina sees 6.5% economic contraction in 2020 after COVID-19 hit -draft analysis

BUENOS AIRES, May 5 (Reuters) - Argentina has sharply cut its economic forecast for 2020 due to the coronavirus pandemic, according to a government analysis that estimated a 6.5% contraction for the year, with activity stalled by a nationwide lockdown and weak global demand.

The draft forecast, which was prepared by the economy ministry as part of an economic framework for the country’s foreign bondholders, compared with an earlier analysis that estimated the economy would contract by between 1% and 1.5% this year.

The economy ministry predicted 3% growth in 2021, unchanged from its earlier analysis from March, which did not incorporate the impact of COVID-19.

The new forecast, contained in an email circulated on Tuesday, also said the South American country would likely post a primary fiscal deficit of 3.1% of GDP this year, deeper than the earlier prediction of a 1.1%-1.5% deficit.

Argentina, Latin America’s third largest economy, has been mired in recession since 2018 and is facing tense negotiations this month with private creditors to restructure around $65 billion in foreign debts. (Reporting by Eliana Raszewski and Adam Jourdan; Editing by Steve Orlofsky)