By Hernan Nessi
BUENOS AIRES (Reuters) – Argentina’s economy is projected to have contracted by 1.4% in the second quarter compared to the same period the previous year, according to a Reuters poll released on Monday. This marks the fifth consecutive decline as the nation grapples with a deepening recession under the stringent austerity measures implemented by libertarian President Javier Milei.
The median GDP estimate from 15 analysts polled by Reuters for the April-June period follows a 5.1% year-over-year decline recorded in the first quarter. The official data is scheduled for release on Wednesday.
Milei’s budget cuts have impacted economic activity, exacerbating poverty and unemployment. The administration contends these measures are essential to curb triple-digit inflation, rebuild reserves, and reverse years of fiscal deficits.
The South American country officially entered a technical recession, defined as two consecutive periods of quarter-on-quarter GDP contraction, during the first quarter of the year.
“We are still in a recession, but there are indications that it may be ending,” stated analyst Marcelo Rojas, referencing signs that the economic downturn may have reached its lowest point.
“GDP has a lot of room to grow, but new capital will be needed to generate momentum,” Rojas added.
Certain sectors in Argentina have rebounded faster than others, particularly agriculture, and oil and gas production from the Vaca Muerta shale region. However, construction and consumption remain weak.
“The agricultural sector, energy, and mining are showing strong recovery rates. In contrast, construction, financial intermediation, and trade are experiencing significant declines,” commented Pablo Besmedrisnik, economist at consultancy VDC.
Besmedrisnik also noted that wages had outpaced inflation in the second quarter, and with the rate of monthly price increases slowing, Argentines’ purchasing power could continue to improve, potentially boosting consumption in the second half of the year.
Monthly inflation has decreased from 25% in December to around 4% in recent months. Nevertheless, annualized inflation remains above 250%, the highest globally, though the government aims to significantly reduce this by year’s end.
The Q2 year-on-year GDP forecasts from analysts ranged between a 1.4% decline, the most common estimate, to a 3.7% drop. The average estimate was for a 1.8% contraction.
President Milei’s government presented its 2025 budget on Sunday, which includes a target of 5% GDP growth for the coming year.