Argentina's economy to shrink 1.8% in 2024, Javier Milei's first year in office

The Argentine economy has contracted by 1.8% in 2024 for the first year of the Milei government, the second year of contraction in a row, but a decline less than forecasts, which were around or above -3%.

The activity of the third largest economy in Latin America recorded a slightly more pronounced contraction in the twelve months of 2024 than in the previous year (-1.6%), according to the monthly estimate published Tuesday by the National Institute of Statistics (Indec).

But the economy, according to Indec, showed signs of marked recovery in December compared to December 2023 (+5.5%), and also a slight improvement compared to November (+0.5%).

In its latest projections, in January, for the Argentine economy, the International Monetary Fund (IMF) predicted a contraction of 2.8% for the year 2024.

Its previous estimates, in October, were for a 3.5% recession in Argentina, like the World Bank. Several private analysts were anticipating a contraction of around 3%.

The IMF has predicted a strong rebound in the Argentine economy by 2025 with 5% growth, in line with government projections.

The first year of the presidency of the ultraliberal Javier Milei was marked, in addition to a brutal devaluation of more than 50% of the peso, by a drastic policy of budgetary austerity, paralyzing public projects, drying up subsidies (transport, energy) and eliminating public bodies and institutes.

"Shock" therapy promised from the beginning by the "anarcho-capitalist" economist, which had as a macroeconomic result the first annual budget surplus in Argentina in 14 years. And inflation, chronic in recent years, reduced in one year from 211% (for the year 2023) to 117%.

Continuing its downward trend, inflation for the month of January stood at 2.2%, the lowest monthly index in four and a half years.

These indicators have, however, had as a corollary a high social cost, with the loss of hundreds of thousands of jobs, and a jump in poverty to more than 50% in the first half of the year, according to official figures. The latter has, in recent months, shown signs of decline, to less than 40%, assures the executive, a figure which is however disputed.

Groggy, the Argentine economy contracted by -5.2% in the first quarter of 2024, then by -3.4% in the second and -2.1% in the third, according to official data, to finally end the year below 2%.

"THE number...!!!" Javier Milei trumpeted on Tuesday on his X account, welcoming more than anything the recovery of activity from December to December, he wrote, despite "having made the largest budgetary adjustment in history", one of his favorite phrases.

For economist Maria Castiglioni Cotter of the Torcuato di Tella University, director of the C&T Asesores firm, the Indec figure "confirms a recovery in activity that continued in December (...) and since May every month: some months with more strength, others less, but a recovery that has ultimately been very sustained."