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IMF or not – Argentina to fall into recession this year

The news that Argentina has started talks with the IMF over a full-blown bailout has masked the fact that – deal or no deal – the economy is likely to fall into recession this year. We now expect GDP to contract by 0.5% this year (vs. growth of 2.5% previously). We’ve also revised down our 2019 growth forecast from 3.2% to 1.5%. These forecasts are well below the consensus, but the risks lie to the downside.
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More from Latin America

Latin America Data Response

Brazil IPCA (Jul. 2022)

The sharp fall in Brazilian inflation to 10.1% y/y in July from 11.9% y/y in June was mainly a result of tax cuts on energy; inflation in most other price categories remains extremely strong. Even so, at the margin, this data release increases the likelihood that the central bank will keep interest rates unchanged (rather than opt for a final 25bp hike) at its next meeting in September.

9 August 2022

Latin America Data Response

Mexico Consumer Prices (Jul.)

The rise in Mexico’s headline inflation rate to 8.2% y/y in July, coming alongside the stronger-than-expected Q2 GDP figures released in late-July, mean that Banxico is almost certain to hike interest rates by 75bp, to 8.50%, when it meets on Thursday. Inflation is set to remain above the 2-4% target range for some time and, as a result, we expect rates to be taken up to 10.00% by year-end.

9 August 2022

Latin America Economics Weekly

Chile’s constitution cost, Massa & Argentina’s mess

A recent report suggesting that provisions in Chile’s draft new constitution could increase annual government spending by 9-14% of GDP underscores that the country is shifting towards the state playing a much bigger role in the economy. Elsewhere, Argentina’s new economic superminister Sergio Massa has talked a good game on sticking to the IMF deal, but meeting the programme’s goals will be a big challenge.

5 August 2022

More from Capital Economics Economist

UK Commercial Property Data Response

RICS Construction Market Survey (Q3)

The deterioration in workload expectations is consistent with the fact that, with Brexit uncertainty prolonged and commercial property values expected to fall, a strong increase in the construction activity is unlikely.

7 November 2019

European Data Response

German Industrial Production (May)

May’s industrial data add to the evidence that the weakness in the sector earlier in the year was at least partly down to temporary factors. Overall, the German economy has clearly shifted down a gear this year, but we expect growth to remain fairly strong.

6 July 2018

European Data Response

Euro-zone Retail Sales (May)

May’s euro-zone retail sales data were a little weaker than expected, but still imply that the consumer sector fared better in Q2 than in Q1. And looking ahead, we think that household spending will remain a key driver of economic growth in the region.

3 July 2018
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