Argentina’s economy extends downturn amid Milei’s cuts

Argentina’s monthly economic activity extended a downturn in March as President Javier Milei pressed on with his austerity drive to put an end to inflation.

The economy in March shrank 8.4 percent from a year ago, more than the median estimate for a 7.3 percent decline among economists surveyed by Bloomberg. On a monthly basis, activity dropped 1.4 percent, according to government data published Wednesday.

Since taking office in December, Milei removed generous energy and transport subsidies, froze public works and sharply devalued the currency. His spending cuts allowed the government to achieve monthly fiscal surpluses in January through April, and Economy Minister Luis Caputo expects another positive print in May. The belt-tightening efforts are reflected in prices, with monthly inflation falling to 8.8 percent in April from a three-decade high of 25.5 percent in December.

Government popularity remains high even as the cuts sting the middle class, with subway fares quadrupling in May. Argentina’s manufacturing and construction output plummeted in March. Industrial production dropped 21.2 percent in March from a year ago, while construction activity plunged 42 percent in the same month, a level not seen since the pandemic lockdowns. Employers in both sectors expect to reduce headcount in the coming months.

Economists surveyed by Argentina’s Central Bank forecast gross domestic product contracting 3.5 percent this year, according to an April poll. The IMF said at a recent press conference it expects Argentina to begin growing again in the second half of the year.