Argentina’s economy was slumping even before Milei's shock therapy

Argentina's economy contracted in the fourth quarter of 2023, cementing a full year of negative growth, even before incoming President Javier Milei slashed spending as part of his shock therapy.

Gross domestic product fell by 1.9 percent compared with the July-September period, according to official data released on Wednesday by the INDEC national statistics bureau. Activity contracted 1.4 percent from a year earlier, slightly less than the median estimate of a 1.5 percent drop by economists surveyed by Bloomberg.

Economists surveyed by the Central Bank forecast GDP will fall 3.3 per cent this year as austerity measures lead to a drop in consumption. Milei took office on 10 December and immediately allowed the peso to weaken by more than 50 percent while cutting state spending.

As output expanded in the third quarter, the country managed to avoid a technical recession. Even so, the struggling economy has contracted for six of the last 10 years.

Annual inflation accelerated to 276 percent last month, affecting purchasing power as the value of pensions and wages erode.