The fall in activity in March follows year-on-year declines of 3.0% in February and 4.1% in January. File
| Photo Credit: AP

Argentina’s economic activity fell 8.4% in March from a year earlier, the country’s official statistics agency said on May 22, its fifth monthly drop in a row and the steepest fall since 2020.

The result was a steeper drop than the 6.9% fall estimated by market analysts in a Reuters poll, underscoring the impact of libertarian President Javier Milei’s cost-cutting policies since taking office in December. Mr. Milei has embarked on a painful austerity drive to bring down rising poverty and annual inflation near 300%.

Nine sectors recorded declines in the year-on-year comparison, led by construction that posted a 29.9% decline and the manufacturing industry which slipped 19.6%, according to the data published by Argentina’s INDEC statistics agency.

Economic activity numbers are seen as a useful early indicator of likely gross domestic product (GDP) results.

The fall in activity in March follows year-on-year declines of 3.0% in February and 4.1% in January.

In the year through March, Argentina’s economic activity fell 5.3%.

President of Argentina, Javier Milei. File

Argentina’s monthly inflation rate eased sharply to a single-digit rate in April for the first time in half a year, data released Tuesday showed, a closely watched indicator that bolsters President Javier Milei’s severe austerity program aimed at fixing the country’s troubled economy.

Prices rose at a rate of 8.8% last month, the Argentine government statistics agency reported, down from a monthly rate of 11% in March and well below a peak of 25% last December, when Mr. Milei became president with a mission to combat Argentina’s dizzying inflation, among the highest in the world.

“Inflation is being pulverized,” Manuel Adorni, the presidential spokesperson, posted on social media platform X after the announcement. “Its death certificate is being signed.”

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Although praised by the International Monetary Fund and cheered by market watchers, Mr. Milei’s cost-cutting and deregulation campaign has, at least in the short term, squeezed families whose money has plummeted in value while the cost of nearly everything has skyrocketed. Annual inflation, the statistics agency reported Tuesday, climbed slightly to 289.4%.

“People are in pain,” said 23-year-old Augustin Perez, a supermarket worker in the suburbs of Buenos Aires who said his rent had soared by 90% since Mr. Milei deregulated the real estate market and his electricity bill had nearly tripled since the government slashed subsidies. “They say things are getting better, but how? I don’t understand.”

Mr. Milei’s social media feed in recent weeks has become a stream of good economic news: Argentine bonds posting some of the best gains among emerging markets, officials celebrating its first quarterly surplus since 2008 and the IMF announcing Monday it would release another $800 million loan—a symbolic vote of confidence in Mr. Milei’s overhaul.

“The important thing is to score goals now,” Mr. Milei said at an event Tuesday honoring former President Carlos Menem, a divisive figure whose success driving hyperinflation down to single digits through free-market policies Mr. Milei repeatedly references. “We are beating inflation.”

Shrinking economy

Even so, some experts warn that falling inflation isn’t necessarily an economic victory—rather the symptom of a painful recession. The IMF expects Argentina’s gross domestic product to shrink by 2.8% this year.

“You’ve had a massive collapse in private spending, which explains why consumption has dropped dramatically and why inflation is also falling,” said Monica de Bolle, a senior fellow at the Peterson Institute for International Economics who studies emerging markets. “People are worse off than they were before. That leads them to spend less.”

Signs of an economic slowdown are everywhere in Buenos Aires—the lines snaking outside discounted groceries, the empty seats in the city’s typically booming restaurants, the growing strikes and protests.

At an open-air market in the capital’s Liniers neighborhood, Lidia Pacheco makes a beeline for the garbage dump. Several times a week, the 45-year-old mother of four rummages through the pungent pile to salvage the tomatoes with the least mold.

“This place saves me,” Pacheco said. Sky-high prices have forced her to stick to worn-out clothes and shoes and change her diet to the point of giving up yerba mate, Argentina’s ubiquitous national drink. “Whatever I earn from selling clothes goes to eating,” she said.

Mr. Milei, a self-proclaimed “anarcho-capitalist” and former TV personality, warned his policies would hurt at first.

“It’s not his fault, it’s the Peronists who ruined the country, and Mr. Milei is trying to do his best,” said Rainer Silva, a Venezuelan taxi driver who fled his own country’s economic collapse for Argentina five years ago.

Argentina’s President Javier Milei speaks during the opening session of the 142nd legislative term, at the National Congress, in Buenos Aires, Argentina, March 1, 2024.
| Photo Credit: REUTERS

Argentina’s libertarian President Javier Milei, in his first policy speech to parliament on Friday, said he would push his package of sweeping economic reforms whether or not legislators back it.

“We are going to change the country for good… with or without the support of political leaders, with all the legal resources of the executive,” Mr. Milei told lawmakers, who have stalled his project of deregulation and budget cuts.

“If you look for conflict, you will have conflict,” he told them.

Mr. Milei offered a recap of his first 82 days in office, in which he devalued the peso more than 50%, slashed state subsidies for fuel and transport, cut tens of thousands of public service jobs, and scrapped hundreds of rules in his bid to deregulate the economy.

“I ask for patience and trust,” Mr. Milei said. “It will be some time before we can perceive the fruit of the economic reorganization and the reforms we are implementing.”

Many of his planned reforms face challenges in court, with more than 60 lawsuits under way by labor unions, business chambers and NGOs, while Argentina has seen massive protests by citizens who fear Milei’s plans will leave them poorer.

“We have not yet seen all the effects of the disaster we inherited, but we are convinced that we are on the right path, because for the first time in history we are attacking the problem by its cause: the fiscal deficit, and not by its symptoms,” Mr. Milei said.

In recent weeks, Mr. Milei has reached out to influential provincial governors, party leaders and former Presidents to forge a “new social contract” for the country, based on ten principles, including a “non-negotiable” balanced budget, “inviolable” private property, and public spending reduced to the “historic” level of 25% of GDP.

Decades of mismanagement

Faced with parliamentary reticence, Milei scrapped almost half of the initial 664 articles in the sweeping deregulatory measure issued after he took office, then withdrew it altogether.

But the president has vowed to return his Bill to parliament. And he has threatened to pass his reforms by Presidential decree if lawmakers do not fall in line.

Argentina is grappling with severe economic struggles after decades of mismanagement that has driven poverty levels to nearly 60% and pushed inflation to an annual rate over 200%.

Mr. Milei, a 53-year-old political outsider, won a resounding election victory last year on a wave of fury over a financial crisis marked by rampant money printing and fiscal deficit.

The government claims some of Mr. Milei’s changes are already bearing fruit: In January, Argentina reported its first monthly budget surplus in 12 years while boosting foreign currency reserves from $21 billion to $27 billion.

But as annual inflation continued to bite, the poor were hit hard as Mr. Milei also ripped away generous transport and energy subsidies and froze aid to 38,000 soup kitchens pending an audit.

Mr. Milei insists Argentina has to swallow a bitter pill to rescue the economy, and has warned the population to brace themselves for things getting worse before they get better.

Argentina’s President Javier Milei
| Photo Credit: Reuters

The government of Argentine President Javier Milei was seeking to salvage his wide-ranging economic reform package after Congress delivered a major blow a day earlier, casting doubt over its future and triggering a fall in financial markets.

Lower house lawmakers rejected several crucial proposals in the bill, sending it back to committee and back to the drawing board.

Also Read | Argentina lawmakers approve Milei’s ‘omnibus’ reform bill; protests continue on streets

The government said it was seeking ways to keep the bill alive.

“All constitutional tools are being evaluated,” presidential spokesman Manuel Adorni said at a news conference on Wednesday. “At some point the law is going to become a reality.”

Mr. Milei’s so-called “omnibus” bill, which had already been significantly reworked by lawmakers before Tuesday’s defeat, included provisions to allow for the privatization of state entities and give the president greater powers, among changes to hundreds of regulations.

The government was now weighing whether to break it up into separate bills, ruling party lawmaker Oscar Zago said in an interview on local radio station Urbana.

Mr. Zago, who leads the ruling party’s minority bloc in the lower house, said a non-binding national referendum could also be held to drum up support for the bill.

Mr. Milei, who has accused opposition lawmakers of “betrayal” for voting against some of the key proposals, argues reforms are needed to rescue Argentina from its worst economic crisis in decades, with inflation running at over 200%.

Argentina’s stock market fell more than 5% on Wednesday. Bonds slid an average 1%, and the peso currency weakened more than 3%.