Since Milei assumed office, Argentina’s economy has been experiencing a decline for the fourth consecutive month in February. Economic activity dropped 3.2% compared to the previous year, which was less than the expected 6% decrease according to analysts surveyed by Bloomberg. Despite President Milei’s economic shock therapy plan, which aimed to lift price controls and devalue the currency, Argentine’s inflation rate has not been reduced as much as hoped.
Since December, Milei has implemented austerity measures 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. However, Milei also allowed public wages and pensions to fall behind rising consumer prices, aiming to reduce costs further. In his televised address on Monday night, Milei touted the country’s first quarterly fiscal surplus since 2008 as a crucial step in combatting inflation.
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 while spending at small- and medium-size businesses fell by 12.6% in March. The country’s central bank surveyed economists who expect a 3.5% contraction in gross domestic product for the year according to their poll conducted in March despite Milei’s optimism about the future of Argentina’s economy.
Experts continue to express concerns about the economic impact of Milei’s austerity measures on job creation and growth opportunities for businesses. Despite his efforts to bring stability back to Argentina’s economy through these measures, it is uncertain whether they will be effective long term or if they will create more problems than solutions.
Overall, while President Milei may have some short-term success with his economic policies, he must remain cautious about implementing too much change too quickly without considering its long-term effects on his people and businesses alike. It remains to be seen how successful his plan will ultimately be in stabilizing Argentina’s economy for good or if it will lead to further hardship down the road.