Saturday, May 17, 2014

Argentina GDP proxy points to looming recession

BUENOS AIRES--Argentina reported disappointing economic growth for March, confirming that the country is moving toward a recession.

March's EMAE economic indicator, a proxy for gross domestic product data, fell 0.9% on both the year and month, the national statistics agency, Indec, reported Friday.

That follows flat on-year growth reported for February and 3% GDP growth in 2013.

The economy is struggling in the face of weakness in the country's top trade partner Brazil and tighter monetary policy as the government attempts to tackle soaring inflation and pressure on the exchange rate after years of sharply increasing monetary supply.

In February, the Central Bank started issuing notes with interest rates close to 30%. That helped to ease some of the inflationary pressure and depreciation of the peso but has also hit consumption hard as interest rates for credit cards and loans soared.

Bank of America Merrill Lynch is predicting a 1.8% contraction in Argentina's economy this year, while neighboring Brazil is seen expanding an anaemic 1.6%.

-Alberto Messer contributed to this article.

Write to Shane Romig at shane.romig@wsj.com

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