Argentina grows 8% though prices 11.1%

Argentine economy has grown 8 per cent in the first quarter with respect to the same period of 2006. It has already accumulated 17 consecutive quarters of interannual rise, as Argentine Statistics and Census Institute (INDEC) disclosed yesterday. Compared to last quarter of 2006, the economic activity has expanded 1 per cent.

Despite new GDP expansion, a slight slowdown has been observed during the last quarter, since economy had grown 8.8 per cent in the same period of 2006.

According to Luciano Laspina from Macrovisión, "this information is not surprising since the Monthly Industrial Estimator (EMAE, in its Spanish acronym) had posted such figure."

In that sense, María Castiglioni Cotter, from the consulting firm Castiglioni, Tiscornia and Asoc., forecasts a 7.5-per cent growth this year, mainly boosted by services.

During the first quarter of the year, prices have increased 11.1 per cent with respect to the same period of 2006. Services rose more (12.6 per cent) than goods (9.4 per cent). In turn, development of index of implicit private consumption prices has posted a 9.9-per cent growth rate.

By breaking GDP down into goods and services, we see that the former went through a 6.1-per cent interannual positive variation, mainly due to greater activity in construction (10.5 per cent ) and in manufacturing industry (6.5 per cent).

Within services, increase with respect to 2006 first quarter hit 8.4 per cent thanks to an advance of 19.5 per cent in financial intermediation sector, of 13.3 per cent in transport, storage and communications sector, and of 10.3 per cent in shops. Banking activity keeps on influencing strongly economy growth.

Gross Domestic Fixed Investment (GDFI) has grown in the first quarter 13.1 per cent with respect to the same period of 2006. This increase is almost 10 percentage points lower than the one posted between January and March of the last year (22.1 per cent). "We continue with trend observed in 2006 last four-month period as regards investment (GDFI hit 12 per cent) due to construction fall," Laspina stated. In the same sense, Castiglioni signalled that "investment has been weak and we expect a significant slowdown this year, totalling 13-per cent increase."

In this way, GDP has reached ARG$322.45 billions, while GDFI has summed ARG$65.5 billions, both measured in 1993 prices.

"Economy keeps on growing strongly as regards demand, where services are channelled through local supply and goods through imports," Castiglioni explained.

Inflationary pressures

For his part, Laspina signalled that demand is greater than supply. "Economy reacts with inflationary pressures."

As regards private consumption, first-quarter growth has hit 8.2 per cent, while consumption of public sector has climbed 6.4 per cent.

Global supply has gone through a 9.3-per cent interannual positive variation, due to a sharp 20.4-per cent import increase.

As regards total demand, apart from positive variations of consumption and investment, exports have grown 7.4 per cent.

GDP expanded 8.5 per cent in 2006, accumulating a fourth consecutive year of rally after 2002 crisis. For this year, Budget forecasts a 4-per cent growth. However, most economists analyse the possibility of a 6-per cent hike, which may reach to 8 per cent again.