Argentina’s economy grew less than expected before midterms

Argentina’s economy grew less than expected in October in the face of a market sell-off just before October midterm elections.

Economic activity expanded 3.2 percent in October compared to the same month of the previous year, the INDEC national statistics bureau said Monday, below the 4.2 percent median estimate of economists surveyed by Bloomberg. On the month, economic activity shrank 0.4 percent, marking the first monthly contraction since June.

In late October, Argentines elected half of the lower house of Congress and a third of the Senate. In the run-up to the vote, investor concern that President Javier Milei would perform poorly – given a stinging defeat in a September local election – set off a sharp bout of extreme volatility in local financial markets. The peso depreciated roughly five percent that month even after US Treasury Secretary Scott Bessent stepped in to defend the currency with a US$20-billion currency swap line. 

Ultimately, Milei’s party won by a landslide and assets rallied on his resurgence. On the heels of Milei’s victory, Argentina’s authorities last week announced the bands within which the currency is allowed to trade would be expanded at a quicker clip, set by the last inflation print, starting in January. The move is expected to help Argentina’s Central Bank accumulate much-needed dollar reserves.

“Economic activity was tepid again in October, marking more than half a year of sluggish activity in the run-up to Argentina’s October 26 midterm election. At the margin, it shows some payback in the financial services that drove September’s surprisingly resilient print, along with more fundamental weakness in manufacturing and sectors reliant on domestic demand, such as retail and hotels and restaurants," said Jimena Zuniga, Argentina economist for Bloomberg Economics.

Argentina’s economy managed to stave off a recession and expanded slightly in the third quarter in the face of the market sell-off. A surge in exports drove growth during the period while consumer spending and government expenditure were mildly positive.
Economists in the Central Bank’s November survey of expectations see South America’s second-largest economy expanding 4.4 percent this year, up from October’s 3.9 percent forecast, with 30.4 percent inflation.