Argentina’s GDP expanded at faster pace in 3Q17. GDP grew 4.2% year-over-year, up from a revised 2.9% in 2Q17 (2.7% before). Growth was in line with the figure anticipated by the official monthly GDP proxy (EMAE). On a sequential basis, output increased by 0.9% adjusted for seasonality, following a revised 0.8% gain in the previous quarter (0.7% before). As a result, GDP grew 2.5% in the first nine months of the year relative to the same period of 2016.

Domestic demand accelerated driven again by gross fixed capital formation. Domestic demand (excluding inventories) grew a solid 5.7%, up from 4.4% in 2Q17 and led by a 13.9% increase in gross investment (7.7% in the previous quarter). Private consumption continued to recover, posting a 4.2% increase (up from 3.8% in 2Q17). Public consumption decelerated to 1.8% from 2.9% previously. On a sequential basis, fixed investment expanded by 2.5% and exports by 2.4%. Private consumption declined 2.2% from the previous quarter while public consumption ticked up 0.5%. Due to lower private consumption, internal demand (excluding inventories) fell 1% from the previous quarter, but this result came after a 4.4% expansion.

The solid growth in internal demand and the strengthening of the peso led to a stronger expansion of imports of goods and services. Imports grew by a hefty 18.7%, significantly higher than the 9.1% gain registered in 2Q17. Exports increased by a modest 2.1%, after posting two consecutive declines (-1.2% each) in the previous quarters.

Growth is broad based across sectors and led by construction activity, financial intermediation and manufacturing. Construction is the most dynamic sector increasing 12.8% year over year in 3Q17 (up from 9.7% in the previous quarter) helped by public investment. Financial intermediation also accelerated to 6.8% from 4.3% in 2Q17. Manufacturing posted a solid 4.1% annual gain in the quarter from 2.8% before. Consistent with the recovery in private consumption, commerce activities increased a solid 3.6% while the real estate sector gained 4.8% and hotels and restaurants expanded 2.7%. The agricultural output decelerated to 2.9% from 5.4% in 2Q17.

We forecast 2.9% growth this year and 3.5% in 2018. Following the positive outcome of the mid-term elections, sentiment has improved markedly providing support to the recovery.

Juan Carlos Barboza
Diego Ciongo