Argentina’s economy slumped for a fourth straight month in February as President Javier Milei’s economic shock therapy plan took hold.
Economic activity fell 3.2 percent in February from a year ago, less than expectations for a six-percent drop, according to analysts surveyed by Bloomberg. On a monthly basis, activity declined 0.2 percent, according to government data published by the INDEC statistics bureau on Tuesday.
Argentina’s economy contracted 1.9 percent in the fourth quarter of 2023.
Since taking office in December, Milei lifted price controls, froze public works and sharply devalued the currency. His austerity measures helped cool monthly inflation in the first three months of the year, falling from a three-decade high of 26 percent in December. Milei used high inflation to further skim costs by letting public wages and pensions fall far behind monthly rises in consumer prices.
The effort is, according to Milei, paying off. The president went on national television Monday night to trumpet the country’s first quarterly fiscal surplus since 2008. The surplus, he said, is the key to eradicating inflation, the source of perennial crisis in Argentina.
“I want to tell Argentines that I understand the situation is hard but also that we are halfway there. This is the last stretch in a heroic effort Argentines are doing and for the first time in a long time, this time will be worth it,” he said at a prime time address from the presidential palace, flanked by his economy minister and Central Bank governor.
Economists are more cautious. They interpret the fiscal surplus as good news but worry about its sustainability, given its crippling impact on economic activity. Construction activity slumped 24.6 percent annually in February and spending at small- and medium-size businesses — Argentina’s largest sector of employment — fell 12.6 percent in March.
Economists surveyed by Argentina’s Central Bank forecast gross domestic product contracting 3.5 percent this year, according to a March poll.
by Manuela Tobias, Bloomberg
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