Argentina’s economy is collapsing under Javier Milei

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favorite stories in this weekly newspaper.

Argentina’s economy came out of deep recession in the third quarter of 2024 in an important event for liberal president Javier Milei in his efforts to end the country’s long-lasting crisis.

GDP grew by 3.9 percent from July to September in seasonally adjusted terms compared to the previous quarter, marking Argentina’s first quarter of growth since the recession ended in 2023, the statistics agency said. the country said on Monday.

Compared to the same period in 2023, GDP for the third quarter contracted by 2.1%.

Rebound comes as mercy marks one year in office, during which he has introduced brutal spending cuts and a strong deregulation agenda. The program has brought down the country’s triple-digit annual inflation and made the libertarian one of the world’s most prominent rights leaders, winning glowing endorsements from the US President-elect Donald Trump and one of his closest advisers, billionaire Elon Musk. .

of Argentina Sovereign bonds rose on Monday, with the premium over US Treasuries that investors want to keep their debt falling 4.4 percent to 677 points, from more than 2,000 when Milei entered in the chair.

Economic problems, mainly caused by previous governments that used inflation-enhancing money printing to support spending, were severe in the first months of Milei’s presidency as weakness and inflation. The national poverty rate rose by 11 points in the first half of 2024 to 53 percent.

Although JPMorgan says it expects Argentina’s economy to end 2024 with an annual contraction of 3 percent, it projects growth of 5.2 percent in 2025. That would only return GDP per capita to the level of 2021, however, when the economy was hit hard.

This expansion was driven by a slowdown in consumer spending and financial investment from a sharp decline earlier this year, and continued strong growth in agriculture and mining exports. Manufacturing and construction are still very depressed.

Analysts have warned that Milei must deliver long-term economic growth to start lifting Argentines’ living standards if he is to win mid-term elections in late 2025, where he will hope to expand his small group La Libertad Avanza.

Major challenges remain for his government, including the lifting of Argentina’s capital and currency controls, which restrict foreign investment and prevent the central bank from building up its reserves. difficult ones.

Sebastián Menescaldi, director of consultancy EcoGo in Buenos Aires, said he expects the economy to continue to grow in 2025 “albeit at a slower pace” than the initial recovery.

“That will still give Milei a strong 5 percent next year . . . but the effect will be felt very unevenly between industries and working groups,” he added.