Argentina’s economy contracted a record 19.1% in the second quarter versus the same period a year earlier as the coronavirus pandemic crippled production and demand, though was slightly better than analyst forecasts.
The steep fall, deeper than a 16.3% drop during Argentina’s major 2002 crisis, came as the South American country imposed a strict lockdown in mid-March to stem the virus. The country has over 640,000 confirmed COVID-19 cases, and nearly 13,500 deaths.
Argentina, a major grains producer, has been in recession since 2018 and is just emerging from default on its sovereign debt, with investors again growing concerned about prospects for its economic recovery and dwindling foreign currency reserves.
The government imposed the lockdown on March 20, and while it has been eased it remains in place until at least Oct. 11, with Argentina still at its peak in terms of daily case numbers. The country recorded over 400 deaths in 24 hours on Monday.
“The key is the lockdown, which restricted supply and was a blow to demand, which pummeled economic activity in the second quarter of 2020,” said consultancy Ecolatina.
The Q2 fall was deeper than neighbour Brazil, though better than hard-hit Peru.
“The strong isolation restrictions imposed from the second half of March and that lasted until August had a significant economic cost for the entire country,” said economist Natalia Motyl of consultancy Libertad y Progreso.
Motyl added that services, construction and manufacturing had been the hardest hit, while the important farm export sector had been less affected by the lockdown, that had taken a hit from global commodities prices.
Argentina’s economy, which declined a revised 5.2% in the first quarter of the year, is estimated to contract around 12% this year, according to a central bank poll and government forecasts.