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.