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UPDATE 3-Argentina economy beats forecasts with first-quarter expansion

(Adds comment from Goldman Sachs)

BUENOS AIRES, June 23 (Reuters) - Argentina’s economy expanded 2.5% in the first quarter of the year versus the same period in 2020, the country’s statistics agency said on Wednesday, edging ahead of analyst forecasts as the country battles to escape a lengthy recession.

The rise came after a 4.3% contraction in the fourth quarter of last year and a record 19% plunge in the second quarter, when the South American grains-producing nation was hammered by the full impact of the coronavirus pandemic.

A Reuters poll of analysts had forecast a 2.4% year-on-year expansion in the first quarter, due to a weak comparative in 2020, which was hit by the COVID-19 pandemic and the launch of nationwide lockdown measures to stall the virus.

The rise was the first quarterly expansion since early 2019. Argentina has largely been locked in recession since 2018 amid debt and currency crises and runaway inflation.

Analysts expect the rebound to pick up pace later in the year against even weaker periods a year earlier. Argentina’s economy contracted almost 10% last year.

“In 2020, Argentina had a year to forget in terms of activity,” said Ivan Cachanosky, chief economist of the Fundación Libertad y Progreso.

“The economy is most likely to recover no more than 7% this year, always depending on what happens with the restrictions.”

Argentina has seen a painful second wave of COVID-19 infections in recent months that led to a re-tightening of lockdown measures, though case numbers now appear to be declining once more and some restrictions have been eased.

Goldman Sachs said in a note after the result that the “robust” growth “reflected very strong sequential growth in investment spending, a sharp increase in net exports, and solid growth in both private and public consumption.”

It added though that recent high numbers of COVID-19 cases could temper the rebound in the second quarter.

“We expect that the surge in Covid cases, and the resulting voluntary and mandated business and mobility restrictions to have softened the positive momentum during Q2,” it said. (Reporting by Jorge Iorio; writing by Adam Jourdan; editing by Jonathan Oatis and Alistair Bell)

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