Argentina’s economy experienced a contraction in the second quarter, representing the first decline in two years and signalling a setback for President Javier Milei’s administration. Gross domestic product decreased by 0.6 percent in the April-June period compared to the preceding three months, outperforming the median estimate of analysts surveyed, which anticipated a decline of 0.9 percent. On an annual basis, the economy expanded two percent, as indicated by government figures released on Thursday. Exports were the sole category contributing to growth in the quarter, accompanied by a decline in imports. Government expenditure, consumer spending, and capital formation all experienced a decline on a quarterly basis.
The unemployment rate increased during the same period to 7.9 percent. Joblessness ranks as the foremost economic concern for Argentines, as indicated by an August poll conducted by AtlasIntel. Sluggish growth has emerged as a byproduct of certain policies implemented by Milei aimed at curbing inflation and addressing persistent deficits. The libertarian leader has maintained a firm control over the peso, allowing it to appreciate in real terms, while simultaneously liberalising the traditionally protectionist economy to facilitate greater global trade. “Argentina’s GDP report confirmed a weak second quarter, but revealed little to help gauge growth ahead. Given strength in primary sectors and little signs of broader growth, we expect economic performance to remain decent, though unspectacular in coming quarters. That’s unlikely to raise alarms for the fiscal or political outlook. It also doesn’t augur smooth sailing toward re-election for President Javier Milei in 2027,” said Jimena Zuniga.
A stronger exchange rate and increased global competition have adversely affected the manufacturing, retail, and construction sectors-those with the highest employment-leading to significant job losses. The more competitive sectors propelling Argentina’s growth – energy, mining, and agriculture – are achieving record exports; however, they employ significantly fewer workers. On Tuesday, the government revised its 2026 GDP forecast downward to three percent growth from the previously anticipated five percent, as outlined in its annual Budget proposal submitted to Congress.
Economists exhibit a more cautious outlook: the annual growth rate is anticipated to conclude the year at 2.1 percent, a decline from the previously estimated 3.5 percent last December, as indicated by the Central Bank’s monthly surveys. Thus far in the third quarter, the growth outlook remains unchanged. In July, both the construction and manufacturing sectors experienced a significant decline, while tax collection in August remained stagnant when adjusted for inflation, indicating a discouraging signal for any potential turnaround.
