Argentina Slides Toward Recession as JP Morgan Cuts 2026 Growth to 1.5%
ARGENTINA · ECONOMY
Key Facts
- —The country Argentina, home to about 46 million people, is South America’s second-largest economy after Brazil. Since December 2023 President Javier Milei has cut public spending hard to end years of high inflation.
- —The background Inflation has fallen and the budget is balanced, but growth has come mostly from oil, gas, mining and farming. Those sectors export a lot and employ few people, so shops and factories have felt little of it.
- —Why now On 24 September the national statistics office reported that economic activity fell 2.9 percent in July from June, the steepest monthly drop since the April 2020 lockdown.
- —What happened On Friday, 25 September, JP Morgan told clients it now expects 1.5 percent growth in 2026. On Monday the same bank had still forecast 2.7 percent.
- —The numbers The bank sees output shrinking at a 4 percent annualised rate in the third quarter, after a 0.6 percent fall in the second. It kept its 2027 forecast at 2.5 percent.
- —What it means for you Investors are already charging more: the premium on Argentine dollar bonds reached 609 points on Friday, the highest since April. For residents, weak demand means soft trade and construction.
- —Still open Whether August and September recover enough to avoid two straight quarters of contraction. The official third-quarter figure is not due until December.
JP Morgan, the largest US bank, has been one of Wall Street’s most upbeat voices on Javier Milei’s Argentina. It has now cut its 2026 Argentina growth forecast to 1.5 percent and expects a third-quarter contraction.
The revision came four days after the bank had published 2.7 percent. What changed in between was a single data release: the worst month for Argentine activity in six years.
What JP Morgan changed
The note went to clients early on Friday, 25 September, according to Clarín, a Buenos Aires daily. It lowered the full-year 2026 forecast from 2.7 percent to 1.5 percent.
For the July-to-September quarter, the bank now expects output to fall at an annualised rate of 4 percent. That is the rate the economy would shrink over a year if the quarter’s pace continued.
Its forecast for 2027, an election year, stays at 2.5 percent. The bank expects exports to grow 11 percent next year, while private consumption rises just 0.4 percent, according to El Economista.
The timing was awkward. On Monday the bank had hosted an event in Manhattan with Economy Minister Luis Caputo.
On Wednesday it said Argentina could reach investment grade if Milei is re-elected in 2027.
Why the bank cut so sharply
The trigger was the monthly activity index of INDEC, Argentina’s national statistics office. It showed a 2.9 percent fall in July from June and 1.4 percent from July 2025.
“We expected a weak activity print for July,” the bank wrote, as quoted by Ámbito. “However, the reported contraction significantly exceeded our forecast of about -1% month on month.”
Leaving out the 2020 lockdown, the 2008 global shock and the 2018-2019 turmoil, no month since 2004 fell further, the bank noted. Activity is now at its lowest level since March 2025.
Gross domestic product had already fallen 0.6 percent in the second quarter from the first. Two quarters of decline in a row is the usual definition of a technical recession.
Growth that does not reach the shops
The bank’s deeper point concerns where growth comes from. Mining and energy for export “generate limited activity in domestic markets, both wholesale and retail”, it wrote.
In July, mining rose 8.4 percent on a year earlier, while commerce fell 5.1 percent and manufacturing 4.6 percent. Together the two subtracted 1.3 percentage points from the index, and they employ far more people than mines.
The bank also expects “the double constraint of contractionary monetary and fiscal policy” to persist. It said urban employment stood 1.1 percent below a year earlier.
On 24 September INDEC reported poverty of 32.3 percent in the first half of 2026. In the 31 urban areas the survey covers, JP Morgan put that at about 9.7 million people.
The government’s answer
Economy Minister Luis Caputo blamed July on “transitory shocks”. He cited less gas available to industry, heavier rain and snow than usual, and fewer hours worked during the football World Cup.
He also pointed out that activity in the first seven months was still 1.7 percent above the same period of 2025.
JP Morgan itself expects some relief ahead. It says inflation should keep easing and peso lending should keep recovering, which would help consumer-sensitive sectors.
Where other forecasters stand
JP Morgan is now among the most pessimistic. The central bank’s August survey of analysts pointed to 2.1 percent growth for 2026.
According to Clarín, the next survey is expected to come in lower.
The consultancy Outlier cut its call to 1.9 percent on Friday. Miguel Kiguel of Econviews, a former finance secretary, expects growth of about 1 percent, Clarín reported.
The OECD, the Paris-based club of rich economies, forecast 2.6 percent on 23 September, before the July data. Goldman Sachs had already cut its estimate to 2 percent by early September.
What comes next
The August activity index, expected in late October, will show whether July was a one-off. Private economists quoted by Ámbito say August and September would need about 6 percent combined growth to avoid a quarterly fall.
A technical recession would not by itself signal a return to Argentina’s old crises. Inflation is far lower, the budget is in surplus and the bank still sees growth resuming in 2027.
Nor does the cut make 2026 a year of contraction. The bank still expects output across 2026 as a whole to be 1.5 percent above 2025.
Frequently Asked Questions
Is Argentina in recession?
Not officially. GDP fell 0.6 percent in the second quarter, and JP Morgan and several local economists expect the third quarter to fall too, which would meet the usual definition of a technical recession. INDEC publishes the third-quarter figure in December.
Why did JP Morgan change its forecast in four days?
Because July’s activity data came out in between. The index fell 2.9 percent from June, against the bank’s own expectation of about 1 percent, so it lowered its full-year figure from 2.7 percent to 1.5 percent.
Does this affect visitors and people living in Argentina?
Mostly indirectly. Weaker demand shows up first in retail, manufacturing and construction, where many Argentines work. Higher bond premiums can also tighten credit and unsettle the peso.
What is country risk?
It is the extra yield investors demand to hold Argentine dollar bonds instead of US Treasuries, measured in basis points. At 609 points, Argentina pays about 6.1 percentage points more than Washington.
Sources: Clarín, JP Morgan adjusts its forecast, 27 September 2026, Ámbito, JP Morgan cuts its activity forecast, 27 September 2026, El Economista, JP Morgan cuts growth forecast to 1.5%, 27 September 2026, INDEC, monthly economic activity estimate for July 2026, 24 September 2026, Infobae, GDP fell 0.6% in the second quarter, 17 September 2026, Ámbito, activity falls almost 3% in July and Caputo’s explanation, 24 September 2026, Los Andes, Caputo’s three transitory shocks, 24 September 2026, El Cronista, country risk above 600 points, 25 September 2026. All retrieved 27 September 2026. JP Morgan’s client note was not published; its content is quoted as reported by the outlets above.
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