MercoPress. South Atlantic News Agency

Argentine economy expands 9% in first half

Economic activity in Argentina expanded an impressive 9% in the first half of 2005 compared to the same period last year, according to the latest report from the Argentine Statistics and Census Institute, INDEC.

June's 8,6% positive performance over the same month a year ago was decisive in the overall index which could be indicating the Argentine economy could expand between 7 and 7,5% this year.

However the Argentine Economy Ministry insists on a more sober 6% growth forecast.

Apparently a 7,2% industrial activity expansion and strong investment also helped keep the economy growing for 31 consecutive months which has now managed to overtake the 1998 production level, when the recession that led to the collapse of the economy in 2001 is considered to have begun.

But the monthly economic activity estimate or EMAE also showed that June expanded 0,1% over May, one of the lowest month to month indexes and with a monthly inflation of 0,9%.

Actually a month to month analysis of the first half shows that January expanded 0,4%; February remained unchanged; March 0,5%; April 0,9%; May 0,7% and June 0,1%.

The main boosters in June were building 12,8%; industry 6,4%; public utilities 24,3% but consumption in supermarkets and shopping malls actually contracted 1,9 and 0,1%.

Still on the bright side, the latest report shows that investment in those industries which are growing strongly is significantly increasing.

Economy Minister Roberto Lavagna said that "investment is in a record 21% of GDP", although he added that to keep the current rate of expansion "another 2,5 points would be necessary, in the range of 23 to 25% of GDP".

With this in mind Mr. Lavagna is scheduled to announce this week a new public-private association regime for investing in improving the country's dilapidated infrastructure.

Overall entrepreneurs' confidence also remains strong with prospects of sustained growth for the rest of 2005 and 2006.

"Preliminary data shows that July was a good month, and something similar is happening with August, which would indicate an annual GDP expansion of 8%", said Javier Alvarado from the public opinion consultants MVA.

A similar business poll from the Argentine Business Administration Development Association shows 45% of companies admitting an improved situation compared to a year ago while for 41% things remain unchanged.

As to the rest of 2005, 27% are optimistic and feel their companies will continue to improve; 53% don't anticipate changes and 20% believe they will undergo a retraction.

The soft spot in the overall analysis remains unemployment which currently stands at a first quarter 13%, with 40% of the 36 million Argentines living below the poverty line.

President Nestor Kirchner currently campaigning for the October mid term elections announced Tuesday that unemployment in June dropped to 11% and the second quarter will average 12%, which he described "as a great advance in our permanent task of combating unemployment".