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2nd UPDATE:Amid Doubts, Argentina Says Economy Grew 2% In April
Dow Jones Newswires
June 23, 2009

By Shane Romig Of DOW JONES NEWSWIRES

BUENOS AIRES (Dow Jones)--Argentina's government said Tuesday the economy grew again in April, even as many private-sector forecasters saw the country plunging into deep recession.

The monthly proxy for GDP rose 2% on the year in April, according to the national statistics agency Indec, which is widely discredited due to accusations of government interference. Official GDP data is only published on a quarterly basis.

Private-sector economists polled by the Central Bank had expected Indec to report proxy growth of 1.6%, although many of them believe the real economy is in a far worse position.

"We continue to see that the official estimate differs significantly from reality, in general, and from private estimates, specifically," Joaquin Ledesma & Asociados said in a report Tuesday.

Indec also surprised economists by revising down the proxy GDP data all the way back to January 2008. Growth for last year was revised down to 6.8%, from the original figure of 7%.

Analysts detected a host of reasons why the GDP data might be revised, but all of them point to one principal cause: The government is manipulating the data to meet its own needs.

It's common for the monthly proxy to be tweaked after the publication of quarterly GDP, said Esteban Medrano, an economist at Macrovision. The latest quarterly number, reported June 18, had shown 2% growth while the proxy had suggested a higher 2.3% gain. So the figures are revised to make them agree, he said.

Nevertheless, the underlying problem "is that the official figures don't correlate with private estimates," Medrano said. "There is a clear distortion of inflation and economic activity data."

While revisions are common, "15 months is too much. That's very suspicious," said Orlando J Ferreres & Asociados analyst Fausto Spotorno.

Economic growth has slowed sharply this year amid falling industrial production and a sharp decline in exports due to the international financial crisis and a severe drought that caused the loss of about a third of the grain seeded last season.

Last April, proxy GDP was clipping along at a 9% year-on-year gain and GDP was up 8.5% on the year in the first quarter of 2008.

Private analysts see an even steeper slowdown and most say that Argentina is in the midst of a deep recession.

In a report Tuesday, Joaquin Ledesma economists said they believe the economy contracted 4.5% on the year in April, a faster pace of contraction than the 3% contraction it saw in the first quarter.

Other data tend to corroborate the concerns about the GDP numbers.

The Latin American Economic Investigations Foundation, or FIEL, and Orlando J Ferreres & Asociados, or OJF, both say industrial output has tanked so far this year. OJF reported earlier this week that May output fell 8.6% on the year.

Raw steel production in May fell 46.2% on the year, according to the Argentine steel manufacturer association. Meanwhile, auto production plunged 23.6% in May from the same month a year ago, according to the Argentine Automobile Manufacturers Association.

Meanwhile, the government reported a pair of economic indicators Friday that showed a steep drop in foreign trade.

Indec reported a first-quarter current account surplus of $1.47 billion, down from $1.68 billion a year ago.

Both imports and exports plunged during the first quarter compared with a year ago. Exports in the first quarter totaled $11.86 billion, down $4.17 billion on the year. Imports were valued at $7.95 billion, down $4.25 billion on the year.

The trend continued in May. While that month's trade surplus shot up to $2.5 billion, 139% higher than a year ago, most of that was due to a steep decline in imports.

Exports totaled $5.14 billion in May, down 17% from a year ago, while imports totaled $2.66 billion, down 49% on the year, according to Indec.

-By Shane Romig, Dow Jones Newswires; 54-11-4103-6738; shane.romig@dowjones.com

(Taos Turner contributed to this report.)

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