Argentina’s economy suffered its worst contraction in nearly four years during the second quarter as the country was hit by one of the worst droughts in recent memory and a currency crisis that forced president Mauricio Macri to seek a $50bn bailout from the International Monetary Fund.

Gross domestic product shrank 4.2 per cent year-on-year during the June quarter, according to Indec, the national statistics agency. That is the first decline in six quarters and is the steepest decline since the third quarter of 2014.

The Argentine peso depreciated sharply in May amid concerns over rising US interest rates and the country’s high level of inflation and large trade and fiscal deficits.

A severe drought has also complicated Mr Macri’s efforts to revive Latin America’s third-largest economy. Agricultural exports are one of Argentina’s main sources of hard currency, and the drought has hit soyabean and corn harvests and resulted in millions in losses for the country’s famed cattle industry.

The slide in the currency has prompted the central bank to repeatedly raise its key interest rates over the past four months. The most recent intervention was in August when policymakers upped the rate by another 15 percentage points to a punishing 60 per cent.

Mr Macri’s government is currently in talks with the IMF for an accelerated disbursement of its bailout package. And while officials have hinted a deal could come as early as later this month, economists have remained sceptical about Argentina’s ability to roll over local debt and restore credibility to its monetary policy.

The peso, up 1.2 per cent to 39.25 per dollar on Wednesday, remains down 53 per cent for the year.

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