Saturday, September 17th 2011 - 05:03 UTC

Argentina’s economy expanded 9.1% in the second quarter, according to Indec

Argentina's economy grew 9.1% in the second quarter from a year earlier, the national statistics agency, Indec, reported Friday.

Deputy Economy Minister Feletti said the government expects the economy to expand about 5% in 2012

As in the first quarter, the economy expanded much faster than expected as consumers took advantage of higher salaries to buy durable goods like cars and flat-screen TVs as a hedge against inflation.

However Morgan Stanley economists said in a note that official data might overstate the true expansion in gross domestic product given the controversy surrounding the government's reporting of inflation.

Most private sector economists say the government understates inflation, which if true would make economic growth look far more impressive than it really is.

“Our measurements suggest that the economy expanded at a more modest 5.9% year-on-year during the second quarter,” Morgan Stanley said.

Even so, few deny that Argentina's economy is booming thanks to ample government spending, good prices for its exports and double-digit wage hikes that allow many consumers to weather inflation that is widely believed to be running above 20%.

Inflation and even greater salary increases are feeding a consumer spending spree that has shown few signs of slowing. Automobile sales rose nearly 32% on the year to nearly 461,000 vehicles during the first eight months of the year, while shopping center sales are growing at a similar rate.

Last month, Deputy Economy Minister Roberto Feletti said the government expects the economy to expand about 5% in 2012, down from estimated growth of 8.2% this year.

In effect a draft version of Argentina's 2012 budget forecasts economic growth of 5% next year while estimating annual inflation at 9%. The 5% growth estimate would mean a sharp slowdown for the economy, which last year expanded by about 9%, according to Indec. The inflation rate would be only slightly changed from Indec's current estimate of below 10%.

The executive branch has been working without a budget since 2010 because Congress declined to pass Kirchner's 2011 budget.

The 2012 draft indicates that government spending will increase by no more than 20%, almost half of what it has risen this year. Federal spending has soared this year ahead of October's presidential election. Critics say this has fueled inflation, which easily surpasses 20% annually, according to private-sector estimates.

In recent years, Argentina's budgets have significantly underestimated economic growth, inflation and government spending. Economy Ministry officials attributed the estimates to prudence. But critics say underestimating the numbers gives the government greater leeway in spending unexpected revenue, freeing it from congressional oversight.

The budget estimates that total debt payments will amount to about 8% of gross domestic product in 2012.

9 comments Feed

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1 Redhoyt (#) Sep 17th, 2011 - 09:24 am Report abuse
And according to Indec, there will be 31 days this September :-)
2 GeoffWard2 (#) Sep 17th, 2011 - 05:00 pm Report abuse
9% inflation and 9% economic expansion = 0% real economic expansion

Morgan Stanley, etc:
23% inflation and 5.9% economic expansion = minus17% real economic expansion.

You can argue about the math, but
what is a negative expansion called? . . . collapse? . . . recession? . . . black hole? . .
3 Retroqqq (#) Sep 17th, 2011 - 05:54 pm Report abuse
Geoff are you trying to be funny or something?

That's why they use PPP. its not affected by exchange rates so much.

2003 8796.969 10.26 %
2004 9749.906 10.83 %
2005 10859.92 11.38 %
2006 12044.9 10.91 %
2007 13338.71 10.74 %
2008 14412.84 8.05 %
2009 14524.27 0.77 %
2010 15854.37 9.16 %

This is pretty good actually. 10% growth almost every year.
4 GeoffWard2 (#) Sep 17th, 2011 - 07:25 pm Report abuse
Try Purchasing Power Parity (PPP),
it is powerfully affected by exchange rate, as it is a measure of long-term equilibrium exchange rates based on relative price levels of two countries - in this case against an international benchmark, typically the USA.
If this is indeed the case, then a country with high inflation will show badly over the years of inflation when compared to a country with lower (or negative) level of inflation.

It's worth mentioning that there can be marked differences between purchasing power adjusted incomes and those converted via market exchange rates, eg. Denmark's nominal GDP per capita is around US$62,100, but its PPP figure is only US$37,304.

I hope this makes some sense to you; I am a 'babe in arms' in such matters.
But it seems to me that where inflation massively outstrips economic expansion - especially low-added-value expansion (eg Soy, cerials & ore), the claims for advancement of the country are an exercise in self-delusion.
5 Retroqqq (#) Sep 17th, 2011 - 10:44 pm Report abuse
lol Geoff why you hate Argentina so much.

They have potential, please let them grow. They are a little bit left behind but they deserve better.

Also some regions like Patagonia are developed already. so they know how to do it.

please don't underestimate Argentina.
6 GeoffWard2 (#) Sep 18th, 2011 - 12:35 am Report abuse
lol :-)
No hate for Argentina; just hate for lies, etc.
7 yankeeboy (#) Sep 18th, 2011 - 12:57 pm Report abuse
#5 People have been thinking there has been potential in Argentina for 300 years. Every time she gets a break it is squandered. The last break came in 20001 when the economy was shattered at that time the country could have done what was necessary to make it great. Unfortunately it took the wrong path, again, the one they have taken for the last 60 yrs and are on the road to doom.
Ask yourself one simple question, why won't the gov't let the IMF audit it's books? It is required to be a member of the IMF/World Bank/IDB/G20 and by treaty for a host of other organizations. The books are cooked, you are in constructive default of the CER bonds, poverty is high and the peso is failing. At some point ARG will be required to submit to the audit or face expulsion from the world's banks ( then you can't trade). It is just a matter of time and they are probably waiting until after the next election so as to appear non-partisan. It is going to get ugly there very very soon. If you live there you should prepare.
8 Retroqqq (#) Sep 18th, 2011 - 01:37 pm Report abuse
ok im ready

If it is so bad why people are voting her again and again.

Who should i trust? all these negativity in this site.
9 yankeeboy (#) Sep 18th, 2011 - 11:05 pm Report abuse
People are voting for CFK because she has been very generous with other peoples money. Do you remember Anses, are there any hard assets left have they been replaced with worthless Arg bonds? I think the same goes for Banco Nation they used to have hard currency reserves but they're all gone now.
Poor people are generally dumb and look for gov't handouts and/or outright bribes. I heard the last prelim vote the going rate was $100 pesos per vote. Weren't the Ks giving spits and refrigerators last go around?
We were having the same problem here with Obama thank goodness the opposition party stopped him from bankrupting the country. It is too bad your opposition is just another form of Peronista.

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