President Javier Milei’s initiatives to rejuvenate Argentina’s economy, following years of stagnation, are encountering diminishing momentum, presenting additional political challenges as the nation approaches next year’s election. Economists have revised their growth projections for this year down to 2.7 percent, a decrease from the 3.5 percent anticipated last December. It falls short of the five percent growth anticipated in the annual budget outlined by his government, yet it represents an improvement over the recession that Milei faced upon assuming office. Many analysts now perceive the expansion faltering, a scenario that would have appeared nearly inconceivable following the libertarian leader’s triumph in the midterm congressional elections last October. Some observe the repercussions of Milei’s choice to refrain from re-entering international markets as evident in a deceleration of growth. “The economy is currently stagnating – from last December to today, the economy hasn’t grown in seasonally adjusted terms,” said Bárbara Guerezta. “The government decided to maintain a much tighter policy stance than we expected by not borrowing abroad, and that was one of the reasons we revised our forecast.” Guerezta revised her growth forecast to a range of two percent to 2.5 percent, down from three percent to 3.5 percent, reflecting a wider trend among economists in Buenos Aires.
The deceleration complicates the subsequent phase of Milei’s economic experiment. His government’s initial austerity push effectively curtailed inflation and contributed to the stabilisation of the economy, which was perceived by the International Monetary Fund as being on the brink of a full-blown crisis. Those spending cuts yielded results more swiftly than anticipated by many. The second part – establishing the groundwork for a more vigorous recovery – is demonstrating greater difficulty. According to the Central Bank’s most recent survey of economists, Argentine output is projected to have contracted by 0.4 percent in the second quarter. That signifies a downward revision of a full percentage point from the previous survey. As of June this year, economic activity has increased by 1.9 percent, a notable decline from the 6.1 percent growth observed in the same period last year, according to government data. Economists highlight that the recovery is not merely diminishing but is also becoming progressively uneven. Mining, energy, and agriculture – driven by the Vaca Muerta shale formation, substantial lithium deposits, and a robust agricultural sector – are generating significant momentum, whereas manufacturing, construction, and commerce are experiencing a decline. “Sales never really stabilised. Sometimes they pick up and then they fall again. It’s a seesaw,” said Miguel Jacobawsky. His plant is functioning at under two-thirds of its capacity, while overhead expenses continue to escalate in nominal terms, thereby compressing margins as he is unable to completely transfer those increases to customers.
Central Bank Governor Santiago Bausili has recognised the decline in momentum. The economy has been expanding at approximately two percent annually since 2024, “much more slowly than we would like,” he stated on August 14 at the Mendoza Stock Exchange. He asserted that monetary policy will continue to be restrictive for the foreseeable future. The deteriorating economic outlook complicates Milei’s prospects for re-election next year, even in light of his notable success in reducing triple-digit inflation to approximately 34 percent at present. “A solid increase in June activity still failed to compensate for sizeable contractions in the preceding two months, leaving Argentine growth in negative territory in the second quarter and posing downside risk to our 2.7 percent full-year projection,” said Jimena Zuniga. The question that many are currently attempting to address is whether voters will prioritise his achievements in controlling inflation over his challenges in stimulating economic growth. Small and medium-sized enterprises, or SMEs, represent a significant portion of Argentina’s private-sector employment. Ongoing challenges within this sector may jeopardise Milei’s support in the upcoming year. “If the government doesn’t pay attention to what SMEs are going through, the SME sector won’t support it in 2027,” Jacobawsky said.
Public opinion surveys present cautionary indicators. An AtlasIntel poll conducted for Bloomberg News in July indicated that Milei’s approval rating stood at 37.1 percent, approaching the lowest level of his presidency. Torcuato Di Tella University’s government confidence index continues to hover near the lows observed during Milei’s tenure, albeit at a level that surpasses that of other recent Argentine presidents at a similar stage in their mandates. “If we arrive close to the election with low approval ratings, a weak labor market and sluggish economic activity, that could generate a lot of nervousness in financial markets,” said Todd Martinez. Incorporating statistical elements such as carry-over effects, analysts project growth to be nearly stagnant this year. “Without investment, amid business closures and no formal job creation, the Argentine economy is moving neither backward nor forward,” said Lorenzo Sigaut Gravina.
