June 23, 2020 / 7:43 PM / 16 days ago

UPDATE 1-Argentina economy contracts 5.4% in first quarter, dented by virus

(Adds details on economy, virus, background)

BUENOS AIRES, June 23 (Reuters) - Argentina’s economy contracted 5.4% in the first three months of 2020, the government statistics agency said on Tuesday, the worst quarter in a year as the major grains producer was sideswiped by the impact of the global coronavirus pandemic.

The South American nation, already mired in recession for two years, faces an even deeper economic contraction ahead, with economists forecasting a full-year drop of over 10% after authorities imposed a tough lockdown in mid-March.

Argentina’s industrial output crashed 33.5% in April, the sharpest drop since the 1990s.

The lockdown, which remains in place in the capital Buenos Aires and the surrounding area, has hammered domestic demand and forced the government to hike public spending in order to stave off rising poverty.

That has inflated the fiscal deficit, with government tax revenues tumbling, a concern for the country’s center-left government as it looks to right its finances and restructure debts that it cannot currently pay.

Argentina, Latin America’s no. 3 economy, is nearing 50,000 confirmed cases of novel coronavirus infections with over 1,000 deaths, while new cases have risen steeply over the last month. (Reporting by Jorge Iorio; Writing by Adam Jourdan; editing by Grant McCool)

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