Argentina economic plunge eases in fourth quarter; recession marks third year

BUENOS AIRES (Reuters) - Argentina posted its smallest economic decline in a year in the fourth quarter of 2020 as the country slowly edged out from under the shadow of COVID-19, though it sealed another grim milestone: three straight years mired in recession.

FILE PHOTO: A woman shops at a store that sells Catholic religious items outside the church of San Cayetano (Saint Cajetan), the patron saint of labour and bread, during his feast day, amid the coronavirus disease (COVID-19) outbreak, in Buenos Aires, Argentina August 7, 2020. REUTERS/Agustin Marcarian

The South American grains producer posted a 4.3% year-on-year contraction in the final quarter, the official INDEC statistics agency said on Tuesday, while the economy plunged 9.9% for the full-year, both in line with analyst forecasts.

Argentina’s economy has been in crisis since 2018 when it turned to the International Monetary Fund for a $57 billion loan. The country defaulted to private creditors last year.

With the economy further hammered by the pandemic and the outlook uncertain, the government is now in crunch talks with the IMF to negotiate a new deal after the country restructured its private foreign debt late last year.

As pandemic lockdowns eased, the quarterly decline was far milder than a revised 10.1% third-quarter collapse and a record 19% drop in the 2020 second quarter, Argentina’s toughest point of COVID-19 restrictions.

“The end of last year was encouraging in terms of activity,” said Matias Rajnerman, chief economist at consultancy Ecolatina. Seasonally adjusted growth had been consistent recently even with some pandemic restrictions still in place, Rajnerman added.

“The outlook for 2021 is encouraging. It will depend on the coronavirus cases and what lockdowns are needed whether that can be transformed into reality.”

Pablo Besme, economist at consultancy Invenómica, said the positive growth outlook was a bright spot amid tough currency controls, high inflation and low investment, though the longer term still looked uncertain.

Positive numbers “will be unsustainable beyond 2021,” he said, adding that Argentina’s economic and debt issues had led to a “decoupling” with the global economy.

A Reuters poll of analysts had forecast the economy would tumble 9.9% for the year and 4.4% in the final quarter, both almost exactly on the mark.

The analysts polled by Reuters had predicted a fourth-quarter contraction ranging from 4.1% to 4.6%. The government and economists forecast a 5% to 7% economic rebound this year, which should start to be seen from the second quarter.

Reporting by Jorge Otaola and Walter Bianchi; writing by Adam Jourdan; editing by Larry King, Marguerita Choy, Richard Chang and David Gregorio