MercoPress. South Atlantic News Agency

It is official: Argentina’s economy contracted in May and June

Former president Nestor Kirchner and husband of current president Cristina Fernandez de Kirchner, considered the political and economic mastermind of Argentina for the last six years.

Argentina's economy officially contracted in May and June for the first time since the economic crisis in 2001 and 2002 which led to a massive default, according to the latest release from the official statistics office, Indec.

The country’s GDP fell 0.4% in June from a year earlier, and was down a steep 0.8% from May, said Indec. May's figures, meanwhile, were revised downward to show a 0.3% drop on the year, worse than the zero growth initially reported.

The Argentine economy has been hit by the international global crisis as well as a downturn in local business activity and investment after years of sustained growth but also of unorthodox polices that have been questioned from several sectors.

The Kirchner administrations have been in conflict with farmers over windfall export taxes, which have plummeted because of the fall in commodities’ prices. The conflict well over 18 months, has reduced considerably crops, created a serious confrontation and cost the Kirchners dearly in the June mid term elections, when they lost control of Congress.

Argentina, one of the world’s breadbaskets, is forecasted to have to import wheat, beef and fresh milk next year if current policies are not modified.

The June figure came in well below the 1.2% on-year growth the market had been expecting, according to the central bank's latest survey of market participants.

Imports, exports and industrial production have fallen sharply during the first half of the year, with independent economists painting an even gloomier picture than the Indec data. Economists have long voiced doubts about the accuracy of Indec's data, with accusations of manipulation of inflation, industrial production and GDP figures. The government denies the accusations.

According to the Foundation for Latin American Economic Research, or FIEL, Argentina's industrial production during the first half of 2009 plunged 10.7% from a year ago, while Orlando J Ferreres & Asociados said it estimated a 9.2% drop. Indec, meanwhile, reported officially that industrial production fell just 1.4%.