Argentina will face a deeper economic contraction due to drought, analysts say

Argentina’s drought will lead to further economic contraction in 2023 than previously expected, according to analysts at Itaú Unibanco Holding SA, who lowered their GDP estimates to -3% from -1.5%.

Analysts, led by João Pedro Bumachar, used forecasts from the Buenos Aires Grain Exchange of a 20% drop in soybean and corn production for their review, according to a report. They also considered the effects of “tighter import controls” aimed at protecting the country’s foreign exchange reserves.

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On Wednesday, the US also said a 20% decline in soybean production this year since its February report.

Argentina is the world’s leading exporter of soymeal and soybean oil and the lower production will mean a lower-than-expected inflow of much-needed dollars to prop up its foreign exchange reserves and comply with a program with the International Monetary Fund.

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