Argentine economy faces first slump since end of debt crisis

viernes 23 de mayo de 2014 09:57 GYT

By Sarah Marsh

BUENOS AIRES May 23 (Reuters) - After a decade of growth, Argentina faces a sharp decline this year as industrial output falls and one of the world's highest inflation rates hits consumer spending and new investment.

The economy had grown steadily since recovering from a 2001-2003 debt crisis and it expanded 3 percent last year but it stumbled in the fourth quarter and likely slid into a recession at the start of this year.

That is now expected to drag on for most or all of 2014.

Critics have for years predicted that President Cristina Fernandez's populist and interventionist policies would push the economy into recession. Paradoxically, it is a tentative switch towards more pragmatic policies that investors have long called for that has apparently tipped it over the edge.

A devaluation of the peso currency and a hike in interest rates in January worsened a new weakness in consumer spending, a pillar of the economy that had helped it withstand external shocks like the 2009 financial crisis.

The measures have hit spending and prompted economists to revise downwards their already bleak forecasts for 2014.

The consensus view now is that the economy will shrink around 1 percent, the first full-year contraction since the debt crisis, when Argentina defaulted on $100 billion.

Output contracted 4.4 percent in 2001 and a stunning 10.9 percent the following year but since then has grown at an average of 6.2 percent a year.   Continuación...