Argentina's economy shrinks 1.7% in third quarter after brief upturn

BUENOS AIRES (Reuters) - Argentina’s economy shrank 1.7% in the third quarter versus the same period the previous year, the government’s Indec statistics agency said on Tuesday, marking a return to contraction following a brief upturn in Latin America’s No.3 economy.

FILE PHOTO: A man shows Argentine pesos outside a bank in Buenos Aires' financial district, Argentina August 30, 2018. REUTERS/Marcos Brindicci/File Photo

The economy has so far shrunk by 2.5% in 2019, Indec said.

The contraction in the third quarter follows a brief upturn for the economy when it grew 0.6% in the second quarter of the year, its first rise since early 2018.

The third-quarter result was slightly better than expected in a Reuters poll published on Monday in which analysts predicted the South American grain giant’s Gross Domestic Product shrank around 2% versus a year earlier.

Argentina’s economy endured a shock in the third quarter after then-candidate Alberto Fernandez defeated conservative incumbent President Mauricio Macri by a wide margin in the Aug. 11 primary election. The results sent markets tumbling and the peso lost a quarter of its value in the month.

The central bank burned through billions in reserves to stabilize the peso before Macri’s government eventually put currency controls into place, including restrictions on dollar purchases. He lost the election to Fernandez on Oct. 27, marking the end to his mandate of painful austerity measures that wore on the patience of voters.

Fernandez will be tasked with managing the country’s looming debt pile of about $100 billion and carefully steering negotiations with creditors, including the International Monetary Fund.

Earlier on Tuesday, the government sent a bill of economic measures to Congress that proposes raising taxes on agricultural exports and taxing foreign assets abroad as the government seeks funds to bolster social spending while coping with annual inflation close to 55%.

(GRAPHIC: Argentina in the red - )

Reporting by Jorge Iorio; writing by Cassandra Garrison; editing by Diane Craft and Lisa Shumaker