Rapid recovery will prove elusive in Argentina

Significance

The primary surplus (0.6% of GDP) was driven by a 35% real fall in primary spending, which offset a recession-induced 4.5% drop in revenues. Month-on-month inflation has also fallen, from 25.5% in December to 11.0% in March, but the fiscal adjustment has deepened the economic downturn, and real wages and unemployment have deteriorated.

Impacts

• Absent an economic rebound, social conditions will deteriorate, affecting Milei’s popular support.
• Though agriculture, energy and mining may boost growth, their share in total output and jobs is not enough to trigger a significant rebound.
• Economic reform delays, ongoing exchange controls and the government’s attachment to an exchange rate anchor will obstruct recovery.