Argentina’s economy contracted for a second consecutive month in May, highlighting a pattern of inconsistent growth as President Javier Milei’s term progresses beyond the halfway mark. Economic activity declined by 0.5 percent from April, falling short of the 0.2 percent increase projected by analysts, as reported by government data released on Wednesday. From a year ago, the gross domestic product proxy increased by 0.2 percent, falling short of the 2.5 percent median estimate provided by economists. Agriculture and mining were the primary drivers of growth on an annual basis, whereas manufacturing and retail experienced declines.
Earlier indicators had already suggested a disparate performance throughout the economy, with exports showing growth, while sluggish imports and tax revenues indicate a lacklustre domestic demand. Moody’s Ratings has emerged as the third and final major credit rating agency to elevate the country’s credit score on Tuesday, thereby bolstering the argument for Argentina’s re-entry into international debt markets. Inflation experienced a deceleration for the third consecutive month in June, reaching its lowest point since August, marking another achievement for Milei. “Another monthly contraction in May reflects volatile Argentine activity data more than a fundamental shift in the country’s growth trajectory.”
Jimena Zuniga said “The data support our view that the agriculture- and mining-led expansion will remain solid, rather than spectacular. Strength in these sectors continues to be offset by weakness in manufacturing, limiting positive spillovers to the broader economy.” Argentina’s gross domestic product expanded by 0.7 percent in the first quarter, surpassing expectations, driven by consumer spending. However, the weakest performance was observed in sectors that are typically rich in employment. Argentine GDP is projected to grow for the second consecutive year in 2026, propelled by unprecedented exports from the energy, agriculture, and mining sectors. Unemployment persists in its upward trajectory as the formal labour force experiences a contraction of nearly half a million jobs.
“Investors remain concerned that uneven growth could eventually lead to a political shift next year,” Morgan Stanley analysts led by Fernando Sedano wrote in a July 10 note. “We keep thinking growth dynamics will become gradually less heterogeneous, as construction activity edges up and as consumers’ sentiment improves through a recovery in real wages and, later this year, a modest resumption of credit.” Economists surveyed by the Central Bank in June project a year-end inflation rate for 2026 at 30 percent, a slight decrease from the 30.5 percent indicated in the prior survey, alongside an anticipated growth rate of three percent.