The Macri administration admits Argentine GDP will fall by 2% in 2016 - first decline since 2002.
The Economy Ministry of Argentina announced that for the first time since President Mauricio Macri decreed a freeze on all statistical data release just days after taking office on December 10, estimates on GDP and other indicators of economic activity will be released.
While the World Bank and other international organizations have projected zero growth or even a decline of 0.5% in Argentina's GDP, the Macri administration now admits that the decline in economic output will be between 1.5 and 2%.
The trend is a sharp departure from last year, when as of September 2015 (the latest data available) Argentine GDP grew by 2.8% from the same time a year earlier. This would be the first year of negative growth for Argentina since the 2002 debacle, during which output plummeted by 11% (the steepest drop since 1930).
The admission surprised even supporters of the conservative Macri administration. Francisco Olivera, chief economic writer for the far-right La Nación, conceded that Macri's now infamous promise of a revival in growth during the second half of 2016 would not be possible.
"Delays are likely," Olivera observed. "The first stage of the administration's plan, which had envisaged tidying up inherited extravagances in order to grow again, will extend to at least until the end of the year." Olivera also noted that Gustavo Lopetegui, the chief economic adviser to the President and former CEO of LAN Argentina, is ordering all departments to reduce their budgets by about 20%. The austerity cutbacks include sizable public sector layoffs, which Interior Minister Rogelio Frigerio announced wold affect at least 70,000 employees.
The recession, however, has already begun to impact the broader labor market, with 76,000 of the 107,000 layoffs registered in the first two months of the year coming from the private sector.
Analysts agree that while budgetary austerity is contributing to the current recession, it's principally due to a sharp increase in prices since Macri ordered a 40% devaluation of the peso on December 17. Inflation, which was already around 25% during most of the former President Cristina Kirchner's second term, accelerated to 35% by February according to provincial estimates, and may reach 55% later this year before slowing.
The trend has already led to a decline of 4.5% in real retail sales according to the Argentine Chamber of Medium Enterprises (CAME). Demand for groceries and other basic household goods fell by 8% in January; the only items that saw a consistent improvement in sales, were store brands.
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