July 25, 2018 / 7:38 PM / 3 months ago

UPDATE 1-Argentina trade gap narrows in June as peso's fall bites

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BUENOS AIRES, July 25 (Reuters) - Argentina posted a trade deficit of $382 million in June, government statistics agency Indec said on Wednesday, driven by a sharp fall in imports in a sign the rapid depreciation of the peso currency was taking a toll on economic activity.

That was smaller than the deficits of $1.3 billion in May and $750 million in June of last year, and marked the narrowest deficit since April 2017. The peso has lost 32 percent against the U.S. dollar this year, with most losses in May and June, making imports more expensive for Argentine companies.

Imports fell 7.5 percent versus June 2017 to reach $5.5 billion, while exports fell 1.4 percent to $5.1 billion. A weaker peso makes Argentine exports more competitive, but primary products exports fell 26 percent due to the country’s worst drought in decades, which harmed farm output.

Capital goods imports - which grew substantially throughout 2017 and early 2018 as companies boosted investment amid economic growth - fell 16.9 percent in June.

Weak corn and soy harvests in one of the world’s leading exporters of both crops contributed to the run on the currency, which prompted Argentina to turn to the International Monetary Fund for financing. The economy contracted in April and May, according to Indec, prompting worries of a recession. (Reporting by Luc Cohen Editing by Chizu Nomiyama)

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