Economic activity in Argentina is starting to indicate that a recession is imminent, with a probability of 98.6 percent. A report reveals a significant increase of 41 percentage points relative to July, during which the recession expectation stood at 56.1 percent. The UTDT centre report indicates that in August, its advanced indicator of economic activity registered a decline of 4.7 percent compared to the previous month, while the trend series-cycle experienced a decrease of 1.2 percent. In August, the impact of the increase in corporate financing rates became apparent. A notable statistic is the 3.9-percent decline in business loans.
Pablo Blanco, asserts that the contraction aligns directly with the increase in interest rates, resulting in higher costs for short-term financing for companies. “This effect is typically observed initially in business loans, as companies modify their demand in response to the increased costs,” he stated. Analysts note that the third quarter indicates a marked decline in industrial activity. The industrial production data for July 2025 indicates a decline in the manufacturing sector’s performance. The index experienced a 1.1-percent annual contraction. This phenomenon can be attributed in part to the diminishing impact of the advantageous “comparison basis” effect characterized by positive values in the first half of the year. The monthly variation supports this observation, revealing a 2.3-percent decline from June, which exacerbated the contraction trend that had already been evident the previous month, where a decrease of 1.6 percent was recorded. “This dynamic confirms that the brief recovery process of industry towards the end of 2024 and early this year has ended before expected, with the complexities it carries in regions where the sector has a high share, such as Buenos Aires Province,” stated Haroldo Montagú.
The Milei administration has forecasted a growth rate of 5.4 percent for the current year in its 2026 Budget proposal, surpassing the 4.7 percent estimate provided by JP Morgan, which reflects the deceleration observed in economic activity following the increase in interest rates and the stagnation of real wages. Should the 5.4 percent threshold be reached, it would indicate a deceleration in Argentina’s economy during the latter half of the year, following a year-on-year growth of 6.2 percent in the first half. In the coming months, analysts predict that it will be feasible to witness declines in monthly fluctuations. Amid the upcoming elections next month, the economy may exhibit more pronounced indications of stagnation. The anticipated stagnation adversely affects sectors that had been on the path to recovery and have yet to reach the levels observed before President Javier Milei’s inauguration in December 2023. One such example is construction, which remains below the levels observed in November 2023. The Synthetic Construction Activity Index experienced a growth of 1.4 percent in July, while the Construya Index increased by 0.1 percent. Although both indices remain in positive territory, they indicate a notable deceleration from the highs attained in the first half of the year.
“The merger towards more modest growth rates suggests that the sector will not be able to stay outside the recessive pressures affecting the entire economic activity, which will hardly be resumed at pre-Milei activity levels,” stated Vectorial. This also has an effect on the observable decline in employment within the sector. When comparing the workforce figures for June 2025 with those from June 2023, there was a decline of 17 percent. This indicates a reduction of 78,791 jobs, highlighting significant challenges for the sector in terms of rehiring employees, despite some evidence of partial recovery in the first half. Both the industrial and construction sectors serve as the largest employers of intensive manpower, and they are also the areas where work stoppages have the most significant impact on unemployment levels. Attention is increasingly directed towards trade. Argentina’s negative trade balance was driven not only by imports of capital goods but also by imports of consumer products, which impact nationwide production and, by extension, the economic activity of specific sectors. Argentina’s 2026 Budget is projected to reveal a deficit of US$ 2.44 billion in foreign trade for the current year, with expectations for this figure to escalate to a deficit of US$ 5.75 billion in the following year.
Industrial manufactured goods constitute 25 percent of total exports, while agricultural manufactured goods represent 35 percent; collectively, the industrial sector contributes to 60 percent of national exports. The greater the impact on the industry, the lower the volume of exports is likely to be. The most recent report from the Argentine Industrial Union’s study centre indicates that 30 percent of business leaders have reported declines in exports. Nonetheless, the industrial sector stands as one of the most adversely affected by the surge in imports, a pivotal element contributing to its decline. In the initial half of the year, foreign acquisitions of consumer goods reached US$ 5.26 billion, reflecting a 32 percent increase compared to 2023. During the same timeframe, there was a decline of 10 percent in industrial production. Imports are projected to reach US$105.76 billion, indicating that from August to December, they will account for US$62.98 billion, as the total for the first seven months of the year also stood at US$62.98 billion. They are projected to experience growth, not only in the latter half of the year but also to increase by 40 percent in 2026 compared to 2025, as indicated in the presented Budget.
Furthermore, the negative trade balance is anticipated to persist for a minimum of three additional years. In the Budget bill, exports for 2027 and 2028 are projected to amount to US$122.41 billion and US$31.5 billion, while imports are anticipated to be US$126.11 billion and US$138.55 billion, respectively. Energy exports are projected to reach US$30 billion by the year 2030. Currently, the industry, which represents the largest share of exports, is significantly influenced by the government’s economic policy of trade openness, resulting in a continuous increase in imports.