Argentina’s economy exits recession in milestone for Javier Milei

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Argentina’s economy emerged from a severe recession in the third quarter of 2024 in a milestone for libertarian president Javier Milei in his bid to end the country’s long-running crisis.

GDP expanded 3.9 per cent from July to September in seasonal-adjusted terms compared with the previous quarter, marking Argentina’s first quarter of growth since it entered recession in late 2023, the country’s statistics agency said on Monday.

Compared with the same period in 2023, GDP for the third quarter contracted 2.1 per cent.

The rebound comes as Milei marks one year in office, during which time he has unleashed brutal spending cuts and a fierce deregulation drive. The programme has brought down the country’s triple-digit annual inflation and made the libertarian one of the most prominent leaders of the global right, winning glowing endorsements from the likes of US President-elect Donald Trump and one of his closest advisers, billionaire Elon Musk.

Argentina’s sovereign bonds climbed on Monday, with the premium over US Treasuries that investors demand to hold its debt falling 4.4 per cent to 677 basis points, down from more than 2,000 when Milei took office.

The economic crisis, largely caused by previous governments’ use of inflation-fuelling money printing to fund spending, had deepened in the early months of Milei’s presidency as austerity and inflation bit. The country’s poverty rate soared 11 points in the first half of 2024 to 53 per cent.

While JPMorgan said it expects Argentina’s economy to finish 2024 with an annual 3 per cent contraction, it is projecting 5.2 per cent growth in 2025. That would only return per capita GDP to the level of 2021, however, when the economy was emerging from the pandemic. 

The expansion was driven by a rebound in consumer spending and capital investment from a sharp decline earlier this year, and continued strong growth in agriculture and mining exports. Manufacturing and construction remain deeply depressed.

Analysts have warned that Milei must deliver lasting economic growth to begin to lift Argentines’ living standards if he wants to prevail at midterm elections in late 2025, where he will hope to expand his La Libertad Avanza’s tiny congressional minority.

Big challenges remain for his government, including lifting Argentina’s capital and currency controls, which are deterring foreign investment and preventing the central bank from building up its hard currency reserves.

Sebastián Menescaldi, director of consultancy EcoGo in Buenos Aires, said he expected the economy would continue to grow in 2025 “though at a slower pace” than the initial rebound.

“That will still give Milei a strong number of 5 per cent next year . . . but the effect will be felt very unevenly between industries and groups of workers,” he added.