Economic Slowdown in Argentina: A Look at President Milei’s Economic Shock Therapy Plan

Argentina’s economy showed signs of improvement in February as President Javier Milei’s economic shock therapy plan began to take effect. Economic activity decreased by 3.2% compared to the previous year, which was less than the expected 6% decrease according to analysts surveyed by Bloomberg. The data released on Tuesday showed a 0.2% monthly decline in activity.

Milei has implemented austerity measures since assuming office in December, such as lifting price controls, freezing public works, and devaluing the currency. These measures helped to reduce monthly inflation from a three-decade high of 26% in December. Additionally, Milei allowed public wages and pensions to fall behind rising consumer prices, aiming to reduce costs further.

The country’s first quarterly fiscal surplus since 2008 was touted by Milei as a crucial step in combatting inflation, a longstanding issue in Argentina. However, economists are more cautious about the sustainability of this surplus, as it has had a significant impact on economic activity. Construction activity decreased by 24.6% annually in February, and spending at small- and medium-size businesses, which are the largest sector of employment in Argentina, fell by 12.6% in March.

Economists surveyed by Argentina’s central bank anticipate a 3.5% contraction in gross domestic product for the year, according to a poll conducted in March. Despite Milei’s optimism, concerns about the economic impact of the austerity measures remain high among experts who believe that sustained growth is necessary for long-term stability.

Since taking office last December