Argentina has emerged from a severe recession in the third quarter, marking a milestone victory for President Javier Milei in tackling the country’s long-standing economic crisis.
According to Argentina’s National Institute of Statistics on Monday, the seasonally adjusted Gross Domestic Product (GDP) for the period from July to September grew by 3.9%. This marks the first positive economic growth for Argentina since the end of 2023 when it entered a recession.
During the same period in 2023, Argentina’s GDP had declined by 2.1%.
This rebound comes on the one-year anniversary of Milei’s presidency. Over the past year, he has implemented large-scale cuts in government spending and relaxed economic regulations.
These policies have helped lower Argentina’s annual inflation rate, which had been in the triple digits, and have elevated this market economist to being one of the most prominent global leaders. He has also gained support from figures like former U.S. President Trump and billionaire Elon Musk.
Argentina’s sovereign bond prices rose on Monday, with investors demanding a 4.4% decrease in the risk premium of holding Argentine debt compared to U.S. Treasury bonds, down to 677 basis points from over 2,000 basis points when Milei took office.
Argentina’s economic crisis was primarily caused by previous governments resorting to inflationary measures such as printing money to fund expenditures.
J.P. Morgan predicts that the Argentine economy will contract by 3% in 2024, but expects a growth rate of 5.2% in 2025, which would bring per capita GDP back to its 2021 level.
In the third quarter, consumer spending and capital investment in Argentina rebounded from earlier sharp declines this year, with agricultural and mining exports continuing to show strong growth, while manufacturing and construction industries remain in severe downturns.
Analysts warn that if Milei wants to win the mid-term elections in late 2025 and expand his majority in Congress, he must achieve sustained economic growth and begin to improve the standard of living for Argentinians.
Sebastián Menescaldi, director of the consulting firm EcoGo in Buenos Aires, anticipates continued economic growth in Argentina into 2025, albeit at a slower pace compared to the initial rebound when Milei took office.
“This will still allow the Milei government to achieve a robust economic growth level of 5% next year… but the impact will be very uneven across different industries and wage groups,” he added.