Bloomberg News

Argentina 9.3% GDP Growth in Third Quarter Most Since 2003

December 16, 2011

(Adds economist’s comment in fifth paragraph.)

Dec. 15 (Bloomberg) -- Argentina’s economy expanded in the third quarter at the fastest pace since 2003, cushioning South America’s second-biggest economy from a slowdown in neighboring Brazil.

Gross domestic product in the three-months through September rose 9.3 percent from a year earlier, compared with 8.6 percent in the same quarter of 2010, President Cristina Fernandez de Kirchner said today at a Toyota Motor Corp. plant in Buenos Aires province. The 58-year-old president was re- elected in October after overseeing annual economic growth that averaged 5.6 percent since taking office in 2007.

“We have to continue working on this path and not get sidetracked,” said Fernandez, who started her second four-year term on Dec. 10. “I’m proud of what we have done and committed to the things that we still need.”

Argentina’s economy is heading to its ninth year of growth after Fernandez and her late husband and predecessor, Nestor Kirchner, boosted public spending to generate jobs and raised pensions and wages to fuel domestic consumption. A slowdown in Brazil, Argentina’s main trade partner, and the global crisis will trim growth to 4.3 percent in 2012, according to the median estimate of eight economists surveyed by Bloomberg.

“The global slowdown will start to be noticed in Argentina and in some other countries of the region in the fourth quarter or in the first quarter of next year,” said Carola Sandy an economist at Credit Suisse AG.

Signs of Stalling

Some sectors are already showing signs of stalling. Exports fell 5 percent in October from a month earlier to $7.5 billion dollars, while industrial production rose 4.1 percent from a year earlier, the slowest pace in two years.

Brazil’s economic growth will slow to 2.97 percent this year from 7.53 percent in 2010, according to the median forecast of economists in a weekly central bank survey.

Argntina’s national statistics institute is due to publish its third-quarter GDP report tomorrow at 4 p.m. local time.

Annual inflation that economists estimate is 23 percent, double the official rate, has helped fuel demand for autos, real estate and dollars, as investors look to preserve their savings. Capital flight in the first nine months of 2011 reached $18 billion, more than twice the pace of a year earlier, according to central bank data.

‘Overheated’ Economy

“The high level of inflation is showing that the economy is overheated,” said Sandy in a telephone interview from New York. “There is investment, but demand growth has surpassed investment.”

Toyota invested $126 million to boost production of its plant by 42 percent to 92,000 units per year, according to an e- mailed statement today from the Industry Ministry. The 776,000 vehicles produced in the country this year through November surpass the record 717,000 in all of 2010.

Fernandez responded to the capital outflow by ordering some companies to repatriate foreign investments and export revenue and by tightening oversight of the foreign exchange market following her election victory. The moves helped quell demand for dollars, allowing the central bank to begin rebuilding reserves that fell to $44.7 billion yesterday from a high of $52.6 billion in January.

Even with her landslide electoral win, inflation may undermine support for Fernandez in a second term. Hugo Moyano, the head of the country’s biggest labor association, today called on businessmen to “contain” prices and asked the government to raise the minimum income tax threshold ahead of annual salary negotiations next year. Moyano, who previously was an ally of Fernandez and Kirchner, also resigned his leadership posts in the ruling Peronist party.

“We are willing to negotiate if businessmen reduce price increases,” said Moyano. “We can’t allow workers to sacrifice themselves to earn an extra penny, and then it’s taken away by the government.”

--Editors: Bill Faries, Richard Jarvie

To contact the reporter on this story: Eliana Raszewski in Buenos Aires at

To contact the editor responsible for this story: Joshua Goodman at

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