(Bloomberg) -- Argentina’s recession deepened in the second quarter as President Mauricio Macri’s efforts to implement free-market reform exacerbated an already flagging economy.
Gross domestic product fell 3.4 percent from the same period a year earlier, the largest year-on-year contraction in almost two years, the statistics agency said in a report published Thursday in Buenos Aires. That compares with the median estimate from 11 analysts surveyed by Bloomberg for a decline of 2.5 percent. GDP fell 2.1 percent from the previous quarter, it’s fourth consecutive contraction.
Macri took office in December and froze many construction projects as he reviewed contracts and devalued the peso, causing a spike in inflation that’s eroded consumers’ purchasing power. The economy is showing the first signs of exiting recession, Macri said at a forum for international investors last week. He is seeking to drum up increased investment to foster growth and move away from a model based on consumption.
The central bank raised its benchmark rate to as high as 38 percent in March as it sought to tame inflation that peaked at 47 percent in July. That drove away fixed capital investment, which plunged 4.9 percent in the second quarter, as businesses refrained from borrowing.
Construction, one of the main drivers of the economy, fell 10.2 percent.
Argentina last week presented to Congress a budget for next year calling for a wider fiscal deficit target, as the government seeks to boost growth by increasing spending.
Macri also ordered a revision of all the country’s statistics after Argentina became the first country to be censured by the International Monetary Fund for reporting inaccurate economic data. An IMF team arrived in the country this week to conduct an Article IV review for the first time in a decade.