Argentina’s Economy Contracts More Than Expected, Escalating Recession

Argentina’s economy shrank by 1.7 percent in the second quarter compared to the previous three months, according to the country’s statistics agency. This deepened the recession in the struggling South American nation.

Argentina’s GDP Falls More Than Expected

Argentina’s gross domestic product fell 1.7 percent year-over-year, exceeding analyst forecasts of a 1.4 percent contraction compared to the same period last year.

This marks the fifth consecutive annualized quarterly contraction and the third straight quarter-on-quarter decline for the South American economy.

Argentina’s major agricultural sector saw significant growth, rising 81.2 percent year-over-year, with fishing up 41.3 percent. However, construction fell 22.2 percent, manufacturing dropped 17.4 percent, and retail activity declined by 15.7 percent, according to INDEC.

INDEC reported continued declines in consumption and private investment, despite Argentina’s efforts to reduce imports and boost exports. Additionally, financial services, real estate, hotels, and restaurants experienced reduced activity.

Argentina entered a technical recession in the first quarter of this year, marked by two consecutive periods of quarter-on-quarter GDP contraction. The country ended 2023 with a 1.6 percent contraction.

Milei’s Austerity Measures Aim to Tackle High Inflation 

Libertarian President Javier Milei, who assumed office in December, has implemented strict austerity measures that have significantly impacted economic activity, leading to increased poverty and unemployment.

The government argues that cost-cutting measures are necessary to control the world’s highest inflation, which exceeds 250 percent, rebuild foreign reserves, and address years of severe fiscal deficits.

Despite monthly inflation remaining steady since May, Milei’s government released a 2025 draft budget on Sunday, projecting inflation to be just above 18 percent next year, with GDP growth at 5 percent for both 2024 and 2026.

Argentine markets initially welcomed Milei’s “zero” deficit budget plan, but experienced a slight decline on Wednesday after the US Federal Reserve announced a 50 basis point cut in interest rates.

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