Argentina’s economy experienced a contraction for the second consecutive month in November, following a midterm election that triggered a significant market sell-off. The INDEC national statistics bureau reported on Wednesday that economic activity decreased by 0.3 percent from October, following a 0.4 percent decline in the previous month. Economic activity contracted by 0.3 percent relative to the same month in the prior year, significantly underperforming the median forecast of two-percent growth from economists. The year-on-year decline was primarily driven by the fishing, manufacturing, and retail sectors, whereas agriculture, mining, and finance demonstrated annual growth.
President Javier Milei’s libertarian party rebounded from a significant defeat in the September elections in Buenos Aires Province to achieve a decisive triumph in the midterms. Argentine assets experienced a significant decline over the seven weeks preceding the October 26 ballot, as market participants anticipated that voters would once more deliver a decisive defeat to Milei. A crucial factor in the turnaround was a financial lifeline from the US, which intervened to support the peso through a currency swap that Argentina settled earlier this month. “Along with recent inflation data, the activity prints indicate that stagflation risks are overshadowing what we had anticipated to be a promising 2026.” That’s unfavorable information, yet not disastrous. Moderate deceleration in activity coupled with accelerated price increases is improbable, in isolation, to obstruct the nation’s trajectory towards macroeconomic stability and more sustainable growth. “But the more important risk is that they could erode public confidence in the government and raise doubt over the political sustainability of Milei’s programme,” said Jimena Zuniga.
Data released last week indicates that the pre-vote volatility persisted in affecting South America’s second-largest economy in the subsequent month. In November, Argentina’s construction sector experienced its most significant monthly contraction of the previous year, coinciding with a deceleration in activity within the manufacturing industry. In September and October, those sectors accelerated their activities to preempt a potential devaluation following the vote, resulting in a lack of activity in November. “This was in line with our expectations; November proved to be a challenging month regarding activity,” stated Federico González Rouco. “However, I believe this perspective is more oriented towards the long-term.” The economy exhibited stagnation throughout the year. “If 2025 ends up showing growth, it will have been due to carryover effects, and that’s becoming clear.”
Argentina’s economy has experienced month-on-month contractions in five of the past eleven months, with no growth recorded in two additional months. In December, monthly inflation surged beyond expectations, reaching 2.8 percent, primarily driven by increases in beef prices, bus fares, and electric bills. According to economists, inflation is anticipated to moderate to 20.1 percent in 2026, while economic growth is projected at 3.5 percent.