Argentina's economy posted mild contraction amid run-off election

Argentina’s economy posted a slight contraction in November amid a volatile run-off election that handed a victory to President Javier Milei, who warned of a long period of stagflation as he implements shock therapy to narrow the yawning deficit.

Economic activity in November fell 1.4 percent from October, according to government data published Tuesday. From the same month a year earlier, activity fell 0.9 percent, more than the 0.5 percent decline forecast by economists surveyed by Bloomberg.

Argentines went to the polls November 19 to choose between Milei and former economy minister Sergio Massa, whose government imposed a plethora of capital controls and price freezes to cap accelerating inflation, while running the money-printing machine to maintain government salaries and benefits. By the end of 2023, inflation hit 211.4 percent and is expected to keep accelerating in the coming months before it begins to ease, according to the International Monetary Fund.

Milei ran on a promise of aggressive fiscal austerity and is staying true to his word. His economic plan, helmed by Economy Minister Luis Caputo, has so far seen an aggressive currency devaluation, a freeze on public works, a sharp rollback on energy and transport subsidies as well as public sector job cuts. Worker unions are planning a nationwide strike Wednesday to protest the austerity measures.

Economists surveyed by the Central Bank forecast that gross domestic product will contract 2.6 percent this year.