In line with expectations, the economy contracted for the fifth consecutive quarter, posting a -0.2% q/q decline (-6.4% y/y). Growth in government consumption was positive for the first time in more than a year (+2% q/q but -1.1% y/y) and net exports supported overall GDP growth as imports contracted and exports grew slightly. Private consumption continued to contract (-2.5% q/q and -12.5% y/y) along with investment. On the supply side, agriculture and livestock came to the rescue (+5.3% q/q) and the manufacturing sector halted its one-year long contraction (+0.6% q/q). While the growth carry-over is at -2.5%, GDP contracted less than in the past three quarters (-2.1% q/q on average). The worst of the recession could be behind us; we expect the economy to slowly emerge from it this year, posting an annual contraction of -1.8% in 2019 and +2% growth next year. Yet as elections loom, the risk of a policy mistake increases; and defeat of President Macri would be a threat to debt sustainability.
