Economic activity fell further in May, albeit at a moderate pace from April. It registered a monthly decline of only 0.1%, but compared to the same month of the previous year, the contraction was 5.5%.
Thus, Argentina’s economy faces its second straight contraction, after a 1.8% decline in the previous month. As a result, progress in the first quarter has completely reversed in two months and the economy is running 0.6% below December levels.
As the agriculture sector fell by 44% year-on-year in May, drought had a decisive impact on the decline. Analysts agree that a contraction in GDP is expected this year due to lower dynamics of consumption, import restrictions and fiscal adjustment.
Under these circumstances, consultants are beginning to predict that Argentina’s growth cycle will be interrupted and that it will fall again after two years.
Data for May, the Monthly Estimator of Economic Activity (EMAE) released by INDEC, revealed this second consecutive drop after an increase in the first quarter. In the first five months of the year, the economy shrank by 0.6% compared to December.
Analysts agree on highlighting the impact of drought on rural areas to understand the general decline. Agriculture, livestock, hunting and forestry experienced a 43.8% year-on-year decline. This sector was the worst hit with 5.78% cases in the economy in May. If agriculture and livestock had maintained the same level as in May 2022, economic activity would not have registered a decline.
The decline in the agricultural sector dragged down other branches associated with field operations. Industry as a supplier to agriculture showed relative stagnation with a year-on-year increase of just 0.1%. Another related commodity, transport, also declined by 2.7%.
Finally, Sousa notes that the impact of the drought will disappear in the third quarter of the year, when EMAE data for July and August are known.
