Argentina’s Economy Shows Signs of Recovery as President Milei Implements Austerity Measures

Argentina’s economy showed signs of recovery in February as President Javier Milei’s economic shock therapy plan began to take effect. Although the country’s economic activity decreased by 3.2% compared to the previous year, it was less than the expected 6% decrease according to analysts surveyed by Bloomberg. The data released on Tuesday showed a 0.2% monthly decline in activity, indicating that the austerity measures implemented by Milei were starting to have a positive impact on the economy.

Since assuming office in December, Milei has implemented measures such as lifting price controls, freezing public works, and devaluing the currency. These austerity measures helped to reduce monthly inflation from a three-decade high of 26% in December. Milei also allowed public wages and pensions to fall behind rising consumer prices, aiming to reduce costs further.

Milei touted the country’s first quarterly fiscal surplus since 2008 in a televised address on Monday night. He sees this surplus as a crucial step in combatting inflation, a longstanding issue in Argentina. However, economists are more cautious about the sustainability of this surplus, as it has had a significant impact on economic activity. Construction activity decreased by 24.6% annually in February, and spending at small- and medium-size businesses, which are the largest sector of employment in Argentina, fell by 12.6% in March.

Economists surveyed by Argentina’s central bank anticipate a 3.5% contraction in gross domestic product for the year, according to a poll conducted in March