Argentina’s economy is experiencing a notable shift, reporting a 3.9% growth in the third quarter of 2024 compared to the previous quarter.
This growth is a welcome change after three quarters of decline, but the annual data tells a more complex story. The GDP has dropped by 2.1% compared to the same quarter last year. However, this is an improvement over analysts’ predictions of a 2.6% contraction.
The backdrop to this recovery involves a challenging economic environment marked by extreme inflation, which reached 211.4% in 2023. This situation led to the election of President Javier Milei in December 2023.
He introduced significant policy changes aimed at stabilizing the economy. His administration has focused on reducing public spending and achieving fiscal balance, which are critical steps toward long-term recovery.
In the first half of 2024, Argentina‘s economy contracted by 3.4%, largely due to declines in key sectors like manufacturing and construction. Manufacturing fell by 17.4%, while construction saw a 22.2% drop year-on-year.
Conversely, agriculture rebounded dramatically from a severe drought, achieving an impressive growth rate of 80.2% as conditions improved. Milei’s government has made strides toward fiscal responsibility, achieving a financial surplus of 0.3% of GDP for the first time in years.
The government achieved this by making substantial cuts to public spending. There was also a commitment to lower inflation rates, which have stabilized around 4% monthly since mid-2024.
Looking ahead, the GDP is projected to contract by about 3.8% for the entirety of 2024. However, forecasts for 2025 are more optimistic, with expected growth of around 5.5%.
In short, this potential recovery could be fueled by increased consumer spending and investment as confidence in government policies grows.
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