MercoPress. South Atlantic News Agency

Argentina’s GDP contracts 0.8% in August but expands 3% in last 12 months

The economy is expected to grow 0.5% in 2009, and 2.5% in 2010

Argentina's GDP fell 0.8% in the second quarter compared to a year ago, the first time in six years, but accumulates a 0.6% raise in the first half of the year, according to a Friday release from the national statistics bureau, Indec.

The bureau also pointed out that economic activity in Argentina rose during the second quarter 0.3% compared to the first quarter of the year. This means that during the last twelve months, the Argentine economy shows a 3% improvement compared to same period last year.

Meantime the current account surplus compared with the same period of 2008, soared to 4.5 billion US dollars. The jump reflects falling imports as factories and consumers cut back on spending. Indec also gave a revised figure for the second-quarter 2008 current account surplus of 781 million US dollars.

The current account is the broadest measure of a country's foreign transactions and includes trade, services and different kinds of financial flows, including interest payments. The data is used to measure the country's dependence on foreign capital.

The 40% drop in imports during the quarter, as manufacturing contracted and consumer spending slowed dramatically, was one of the main reasons that the current account surplus mushroomed.

The Argentine economy is now expected to expand just 0.5% this year from a previous forecast of 4% made a year ago. The government expects the economy to grow 2.5% in 2010.

Friday's GDP figures as well as the new growth estimates are a far cry from the rapid economic expansion Argentina had experienced until recently, with GDP growth over 6% for the last six years.

Indec figures have been widely questioned for more than two years as private economists accuse the government of overstating growth and understating inflation for political gain and to pay lower rates on inflation-linked bonds. However the latest data was seen as more credible than recent releases.

“The figures are beginning to get a little closer to reality, but not by much,” said Ricardo Castiglioni, a director at CT Asesores Economicos, a consulting firm in Buenos Aires. “This report still differs from most private estimates out there, but the estimates for 2010 growth in the budget released earlier this week seem to be much closer to what some private estimates show.”