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Argentine economy shrinks 5.8 percent in May year-on-year

July 24, 2018

Political parties opponents and social movements protesters holds a sign that reads in Spanish " Get out IMF " with a picture of Christine Lagarde, International Monetary Fund Managing Director, during demonstration against International Monetary Fund near the G20 Finance Minister and Central Bank governors meeting in Buenos Aires, Argentina, Saturday, July 21, 2018. (AP Photo/Gustavo Garello)

BUENOS AIRES, Argentina (AP) — Argentina’s economy contracted 5.8 percent in May compared to the same period a year ago, the official INDEC statistics agency said Tuesday, raising concerns the country could fall into recession in 2018.

Argentina has been hit by a recent currency crisis. That led the government to seek a $50 billion financing deal with the International Monetary Fund aimed at strengthening the sputtering economy as the country fights double-digit inflation.

Turning to the IMF has brought back bad memories for Argentines who blame its policies for the country’s worst economic crisis in 2001.

President Mauricio Macri has told Argentines that they will not suffer another economic implosion. But they continue to lose purchasing power to one of the world’s highest inflation rates, and many have staged protests against Macri’s belt-tightening policies, which include layoffs of government workers and the slashing of subsidies on transportation and utility rates.

The INDEC also said that economic activity shrank 1.4 percent in May versus April. The statistics agency said agriculture and livestock were among the most-affected industries contributing to the slowdown. Manufacturing and transportation and communications also retrenched.

“The decline of activity in May reflects not only the adverse weather shock over agricultural production but also the impact of tighter financial conditions over the broader economy,” Goldman Sachs economist Alberto Ramos said in a research note. “Overall, we see a very significant risk that the economy will experience a recession in 2018.”

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