Itaú BBA - ARGENTINA - GDP expanded in line with expectations

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ARGENTINA - GDP expanded in line with expectations

September 21, 2017

Domestic demand was driven by gross fixed capital formation.

Argentina’s GDP in 2Q17 was consistent with the monthly GDP result. GDP grew on a year-over-year basis by 2.7% in line with the figure anticipated by the official monthly GDP proxy (EMAE), after posting a 0.4% gain in 1Q17. On a sequential basis, output increased by 0.7%, adjusted for seasonality, after rising by a revised 1.2% in 1Q17 and 1% in 4Q16. As a result, GDP grew 1.6% in 1H17 relative to the same period of 2016.

Domestic demand was driven by gross fixed capital formation. Domestic demand (excluding inventories) grew a solid 4.4%, led by a 7.7% increase in gross investment. The gain in investment followed a 3.2% year over year increase in the previous quarter. Private consumption recovered posting a 3.8% increase (up from 0.9% in 1Q17). Public consumption also rebounded 2.9% (1.4% in 4Q16). On a sequential basis, public private consumption and public consumption increased by 3.8% and 1.4%, respectively, while fixed investment expanded by 8.3%. So, internal demand (excluding inventories) gained 4.3% quarter-over-quarter, following a 1.5% increase in 1Q17.   

Imports of goods and services continued to grow strongly, supported by the recovery of internal demand and the strengthening of the peso. Imports grew by a hefty 9.1% year over year in 2Q17 (up from 4.8% in 1Q17 and 3.5% in 4Q16). Exports of goods and services declined again, now by 1.2% year over year after falling 1.8% in 1Q17. 

GDP growth was broad based but led by construction activity. Construction, helped by public investment, increased 9.7% year over year followed by the agricultural sector (4.9%) and manufacturing (2.5%). Other activities related to consumption registered growth, like hotels and restaurants (3.3%), commerce (1.7%), and real estate (1.1%). Transportation and communication increased by 4.0% while financial intermediation rose by 4.4%. 

The economy will likely continue to grow at a solid pace in the second half of the year. Diverse coincident and leading indicators (industrial output, construction activity, tax collection, and consumer confidence) came in strong in July and August. We forecast a GDP growth rate of 2.5% in 2017, with risks tilted to the upside. 


Juan Carlos Barboza
Diego Ciongo



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