World Economy

Argentina Says Growth Recovering

Argentina Says Growth RecoveringArgentina Says Growth Recovering

Economic growth in Argentina, Latin America’s second-largest economy, seems to be on the path to recovery. Its economic index in May 2017 displayed remarkable improvement.

The country’s economic issues, including high inflation and a fiscal deficit, led to a recession in mid-2015. The aftershocks from the recession still affected Argentina’s economy in 1Q17, marketreality reported.

The leading economic index in Argentina rose 3% in May 2017 compared to 0.70% the previous month. The index currently stands at 151 points. Its base value of 100 was set in January 1993.

According to a report from Universidad Torcuato Di Tella, the probability that Argentina could fall into a recession fell to 9% in May 2017 compared to 12% in April 2017.

The economic index picked up in May 2017, mostly driven by expansion in the financial, construction, and agricultural sectors. The only exception was the decline in rubber and plastic production.

President Mauricio Macri’s efforts over the last year resulted in a number of reforms to improve the country’s economic stability and credibility. As a result, Argentina’s economy moved to positive growth territory in the second half of 2016. According to the International Monetary Fund report, the country’s GDP growth in 2017 is expected to grow 3%, driven by higher exports and investments.

The Global X MSCI Argentina ETF, tracking the largest and most liquid securities with exposure to Argentina, gained about 6% in May 2017. The fund allocates more than 65% to the energy, information technology, and financial sectors.

Meanwhile, in May, Latin American equities declined amid the political chaos within some of its member nations. These markets are considered more volatile than the developed markets, mostly due to the structural inefficiencies faced by its economies.

Latin American market shares declined in May. In 1Q17, the Latin American markets had seen a remarkable rise compared to the US market, mostly due to the rise in oil prices since 2016.

However, the slump in oil prices since the beginning of 2017, have resulted in losses for Latin American equities in May 2017, reversing some of the gains of 1Q17. The iShares Latin America 40 ETF fell 3% in May 2017 compared to a 1% gain in the SPDR S&P 500 ETF.

Brent crude oil prices have declined 16% so far in 2017 through June 13. The Latin American markets depend heavily on its commodities exports—including oil, raw materials, and minerals—to global markets.

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