MercoPress. South Atlantic News Agency

Guessing time: Argentine economy expanded or contracted in 2009?

Industrial production soared in February boosted by car exports to Brazil

Argentine industrial output grew by 11% in February compared to a year ago and 3.4% over January, powered by car and steel plants feeding demand from neighbouring Brazil, which is recovering faster than expected from the global crisis.

The government also announced that the Argentine economy in 2009 expanded 0.9% over 2008, but private analysts estimate the economy actually contracted 3.9%.

The index was announced Friday by the controversial Statistics Office, Indec, which showed Argentine automotive production shot 140% higher in February versus the same month last year while raw steel output grew 53%.

A separate Indec release Indec said that Argentine GDP expanded 2.6% in the last three months of 2009 versus growth of 4.1% in the same 2008 period, with overall GDP growth for the whole of 2009 at 0.9% compared with a 6.8% expansion in calendar 2008.

However many Argentine private analysts that question Indec’s growth, employment and inflation statistics say the country's economy contracted last year.

Economists at Morgan Stanley, Goldman Sachs Group Inc. and Buenos Aires-based Ecolatina said GDP contracted in 2009, the first decline since a drop of 11% in 2002. According to Ecolatina, Argentina’s GDP shrank 3.8% in 2009, the second-biggest contraction in Latin America after Mexico’s 6.5%.

“Last year the economy suffered one of the worst droughts in its history, drastically cutting agricultural output and pulling down production of goods,” Ecolatina said.

Agriculture production in Argentina, Latin America’s third- biggest economy after Brazil and Mexico, fell 15.8%, while exports fell 6.4%, according to Indec. Investment fell 10.2%, the report said.

Argentina's government expects the economy to grow 2.5% in 2010, according to its budget proposal. That compares to official forecasts of 6% growth in Brazil, Latin America's largest economy and 3.9% in Mexico, the region's second largest economy.

Argentina's growth and industrial output data releases were accompanied on Friday by additional financial information from the government.

The primary budget surplus narrowed to 1.21 billion pesos (310 million USD) in February from 1.60 billion pesos reported in February 2009. Tax income growth has slowed as Argentina's economy tries to pull out of the 2009 slowdown caused in part by the world financial crisis.

The government faces about 15 billion USD in debt payments this year as it seeks regulatory approval to reopen the country's 2005 debt restructuring. Argentina hopes to re-enter the international capital markets once it restructures 20 billion in paper left over from the country's 2001/2002 debt default.

Argentina's current account surplus widened to 1.58 billion USD in the fourth quarter of 2009 from 1.24 billion in the same period a year earlier while the full-year current account surplus rose to 11.29 billion last year from 7.09 billion in 2008.