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By Eliana Raszewski
BUENOS AIRES, Dec 29 (Reuters) - Argentina’s gross domestic product shrank 0.8 percent in the third quarter from the same period a year earlier, official data showed on Monday, as high inflation and heavy currency controls put Latin America’s No. 3 economy back into negative territory.
On a quarter-on-quarter basis, gross domestic product shrank 0.5 percent compared with a slightly revised expansion of 0.8 percent in the second quarter.
The economy contracted in the fourth quarter of last year and in the first of 2014 before Argentina reported a 0.9 percent expansion in the second quarter, a result that private analysts said understated the country’s financial ills. Slack demand from No. 1 trade partner Brazil is also a problem for Argentina.
“We expect the recession to continue into next year,” said Camilo Tiscornia, an economist at C&T Consultants in Buenos Aires. “Brazil could recover a bit, but not much.”
Also on Monday, the government’s Indec statistics agency said industrial output shrank a more-than-expected 2.1 percent in November versus November 2013, marking the 16th consecutive monthly decline. The median forecast in a Reuters poll of analysts had been for a 1.7 percent drop last month.
Industrial output fell 1.1 percent in November from the previous month in seasonally adjusted terms, Indec said.
Argentina relies on central bank reserves for financing. With foreign investment hobbled by the country’s sketchy credit history, punctuated by defaults in 2002 and 2014, the government uses currency controls to keep U.S. dollars in the country.
Manufacturers that import materials needed for production complain they cannot get their hands on the greenbacks needed to buy parts and machinery from other countries.
The falling international price of soy, Argentina’s main agricultural export, has added to the pressure this year while inflation rages somewhere between the government’s estimate of 24 percent and private estimates that go as high as 40 percent.
Indec said Argentina had a current account deficit of $736 million in the third quarter after posting a revised $808 million surplus in the second quarter.
The current account is the broadest measure of a country’s foreign transactions, encompassing trade, services and an array of financial flows, including interest payments. (Writing by Hugh Bronstein; Reporting by Eliana Raszewski; Editing by Richard Lough, Meredith Mazzilli and David Gregorio)