December 16, 2019 / 8:53 PM / 8 months ago

Argentina political shock seen dragging economy into the red in third quarter - Reuters poll

BUENOS AIRES (Reuters) - Argentina’s economy likely contracted in the third quarter, a Reuters poll published on Monday showed, falling back into the red after a shock primary election result in mid-August shook the country’s markets.

FILE PHOTO: Soy plants are seen at a farm in Carlos Casares, Argentina, April 16, 2018. Picture taken April 16, 2018. REUTERS/Agustin Marcarian - RC19B97E7100/File Photo

The South American grain giant’s Gross Domestic Product shrank around 2% versus a year earlier, hit by high inflation, a sharp fall in the peso and a decline in domestic activity, the average of a poll of six local and foreign analysts showed.

Reviving growth is the main challenge for new President Alberto Fernandez, who has said Argentina will only be able to pay its creditors if it can revive the economy. The country is facing talks to restructure around $100 billion in debt.

The third quarter was marked by a landslide defeat for conservative leader Mauricio Macri in an Aug. 11 primary election, a result that battered the country’s markets and left most people ruling out his chances of reelection.

Macri was defeated in an Oct. 27 general election.

“The dynamics of the third quarter were divided into two distinct stages. ... In the first month and a half, the activity registered a positive dynamic, mainly driven by exchange and financial stability,” consultancy Eco Go said in a note.

After the primary election “there was a strong contraction in activity, along with the jump in the exchange rate and the acceleration of inflation,” it added.

Argentina’s official statistics agency INDEC is expected to release official GDP data for the third quarter on Tuesday. The economy had edged up 0.6% in the second quarter after being in negative territory since the first half of 2018.

Graphic: Argentina in the red - here

Reporting by Hernan Nessi; Writing by Adam Jourdan; Editing by Richard Chang

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