Sluggish Economy, President Milei’s Shock Therapy: Argentina’s Tough Road to Recovery

In February, Argentina’s economy experienced its fourth consecutive month of decline, with economic activity decreasing by 3.2% compared to the previous year. Despite this setback, President Javier Milei’s economic shock therapy plan began to take effect. On a monthly basis, activity decreased by 0.2%, as reported by government data on Tuesday.

Since taking office in December, Milei has implemented austerity measures such as lifting price controls and devaluing the currency significantly. These measures helped to slow down monthly inflation in the first three months of the year, following a peak of 26% in December. Milei has leveraged high inflation to control costs by allowing public wages and pensions to lag behind consumer price increases.

In a national television address on Monday night, President Milei celebrated the country’s first quarterly fiscal surplus since 2008. He emphasized that the surplus is vital in combating inflation and expressed optimism about the progress being made so far. However, economists are more cautious about the long-term sustainability of this surplus due to its impact on economic activity.

Some worrying statistics include a 24.6% annual decline in construction activity in February and a 12.6% drop in spending at small- and medium-sized businesses in March, which are the largest source of employment in Argentina. Economists surveyed by Argentina’s central bank anticipate a 3.5% contraction in gross domestic product for the year 2024 based on a March poll. As the economy faces challenges, both the government and experts are closely monitoring the situation to determine the best path forward.

Milei’s economic shock therapy plan has been met with opposition from some sectors of society who argue that it is too harsh and will lead to further social unrest and economic instability. However, supporters believe that it is necessary for long-term stability and growth.

The government has also been accused of not doing enough to support small- and medium-sized businesses during this time of economic downturn