Argentina's economy continues to face challenges as inflation rises, despite President Javier Milei's economic reforms. In June, the country's consumer price index increased by 4.6%, breaking a five-month trend of declining inflation [583f6ba7]. This rise in inflation poses a significant challenge to Milei's efforts to combat the severe economic crisis in the country. Since assuming office in December, monthly inflation has reached its highest point of 25%. The main drivers of the June inflationary increase were rising utility costs, particularly electricity and gas prices. The cost of living in Argentina has increased nearly 80% in the first five months of 2024 compared to the same period last year [583f6ba7].
The Argentine peso has also been affected, hitting a record low against the dollar. This further complicates Milei's economic reform plans. Milei is seeking a new loan from the International Monetary Fund (IMF) to eliminate capital controls. However, the IMF has reduced expectations of a new agreement due to the uncertainty surrounding Milei's economic program [583f6ba7].
Despite the challenges, Congress has approved Milei's sweeping legislation, which is seen as a positive signal to the markets. His measures include cutting public spending, downgrading government ministries, eliminating government jobs, suspending new public works contracts, and removing fuel and transport subsidies [23c13080]. However, the construction and manufacturing industries continue to experience a decline in economic activity. The construction industry saw a 29.9% decline in economic activity, with almost all public works being canceled. The manufacturing industry also saw a 19.6% drop, resulting in layoffs and reduced production. The only sectors reporting growth were agriculture and livestock, mining, and fishing [23c13080].
Economists surveyed by the Central Bank predict a 3.8% contraction in GDP this year, followed by 3.4% growth in 2025 [23c13080]. The International Monetary Fund predicts a 2.8% contraction in Argentina's economy this year. INDEC's data from 2023 showed that 41% of the country was living in poverty, while a more recent study from March 2024 estimated the figure to be 55% [94819b99].
Inflation in Argentina has dropped to single digits under President Javier Milei's spending cuts. Milei campaigned on taking a 'chainsaw' to state spending and has laid off 70,000 public sector workers and cut pensions by nearly 35% [dfd72093]. However, despite these efforts, 57% of the 47 million people in Argentina are still living in poverty [dfd72093]. Trust in the government remains low, but trust in Javier Milei is high. Milei warned that things would have to get worse before they could get better. Argentina's Central Bank is looking to loosen foreign exchange controls to regulate access to the U.S. Dollar. Argentina's economy is expected to take time before progress can be made and foreign investment returns. Milei's approval rating remains around 50% according to local polls. Milei wants to transition public sector functions to the private sector to turn Argentina into a beacon of economic prosperity [dfd72093] [583f6ba7].