According to the Statistical Institute (Instituto Nacional de EstadÃsticas y Censos, INDEC), economic growth in Q3 accelerated from a revised 2.9% annual expansion in Q2 (previously reported: +2.7% year-on-year) to 4.2%.
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The print marked the third consecutive quarter of growth, and the fastest expansion in over four years. The acceleration was spearheaded by the domestic economy, which is showing clear signs of strengthening. On a quarter-on-quarter basis, economic growth came in at 0.9%, above Q2’s 0.7% increase.
Overall, Q3’s national accounts data suggests that President Mauricio Macri’s turn to economic responsibility is bearing fruit.
The positive data came shortly after the parliament approved a controversial but necessary reform of the pension system.
Annual growth in the domestic economy was buttressed by a surge in domestic demand, which grew 8.4% in Q3, more than doubling the 4.0% year-on-year expansion recorded in Q2.
Private consumption ticked up from a 3.7% increase in Q2 to a 3.8% rise in Q3, the strongest reading since Q3 2015.
Fixed investment expanded an impressive 13.9% in Q3, coming in well above Q2’s already solid 7.7% increase. The acceleration in Q3 was driven by an expansion in construction and transport equipment and machinery and equipment and marked the fastest pace of expansion in six years.
This attests to the ongoing recovery in the industrial sector. Lastly, growth in government consumption came in at 1.8%, down from 2.9% in Q2, a testament to the government’s efforts to curb public spending and increase fiscal responsibility.
Contrasting the domestic economy, the performance in the external sector was less positive.
As imports grew at a much faster pace than exports, the external sector made a negative contribution to growth. Exports swung from a 1.2% annual contraction in Q2 to a 2.1% expansion in Q3, due to recovering overseas orders.
On the other hand, growth in imports surged from a 9.1% increase in Q2 to a sharp 18.7% rise in Q3. The increase largely reflected imports of industrial equipment into the economy, in line with growth in fixed investment.
The Q3 GDP result was further good news for President Macri following a complicated 2016.
Economic growth in H1 recorded a cumulative expansion of 1.7% and the positive momentum is expected to carry over into the last quarter of the year, as the latest real sector data suggests.
The expansions expected this year and next year would mark the first two consecutive years of growth since 2011 and underscore the positive impact Macri’s pro-market, fiscally responsible policies are having on the economy, which was plagued by economic distortions and imbalances.
FocusEconomics Consensus Forecast panelists expect the economy to grow 3.1% in 2018, which is unchanged from last month’s forecast. For 2019, panelists expect the economy to expand 3.2%. ■