Argentina's economy posts first quarterly contraction since 2024

Argentina’s economy contracted in the second quarter for the first time in two years, marking a setback for President Javier Milei’s administration.  

Gross domestic product fell 0.6 percent in the April-June period from the previous three months, better than the minus 0.9 percent median estimate of analysts surveyed by Bloomberg. On an annual basis, the economy expanded two percent, according to government figures published Thursday. 

Exports were the only category that drove growth in the quarter along with a pullback in imports. Government expenditure, consumer spending and capital formation all declined on a quarterly basis. 

The unemployment rate ticked up during the same period to 7.9 percent. Joblessness ranks as Argentines’ top economic concern, according to an August poll by AtlasIntel. 

Sluggish growth has become collateral for some of Milei’s policies to tame inflation and eliminate chronic deficits. The libertarian leader has kept a tight grip on the peso, letting it appreciate when adjusted for inflation, while opening up the historically protectionist economy to more global trade.

“Argentina’s GDP report confirmed a weak second quarter, but revealed little to help gauge growth ahead. Given strength in primary sectors and little signs of broader growth, we expect economic performance to remain decent, though unspectacular in coming quarters. That’s unlikely to raise alarms for the fiscal or political outlook. It also doesn’t augur smooth sailing toward re-election for President Javier Milei in 2027," said Jimena Zuniga, Argentina Economist for Bloomberg.

A stronger exchange rate and more global competition has hit manufacturing, retail and construction industries – the top three by employment – hard, resulting in job losses. The more competitive sectors driving Argentina’s growth – energy, mining and agriculture – are breaking export records, but employ far fewer workers. 

On Tuesday, the government cut its 2026 GDP forecast to three percent growth from five percent previously, according to its annual Budget proposal sent to Congress. Economists aren’t as optimistic: annual growth is projected to finish the year at 2.1 percent, down from a forecast of 3.5 percent last December, according to the Central Bank’s monthly surveys. 

So far in the third quarter, the growth outlook hasn’t improved. Construction and manufacturing sectors both declined sharply in July, while tax collection in August was flat when adjusted for inflation, a discouraging signal for a turnaround.