Argentina emerges from economic downturn, celebrating triumph of Libertarian leader Milei
Financial growth was at 3.9% in the last quarter of July to September, as per Argentina's statistics agency, announced on Monday. The agriculture and mining sectors contributed significantly to this expansion, along with a notable increase in consumer spending. However, the manufacturing and construction sectors faced significant drops in production.
The news of this economic improvement emerges a year after Milei's election on a platform addressing persistent hyperinflation and revitalizing the ailing economy. His initiatives include dramatic budget cuts, reducing inflation and improving the country's fiscal health. Unfortunately, these actions have led to higher unemployment rates and increased poverty.
Milei's fiscal strategies have garnered approval from the incoming US President, Donald Trump, whose efficiency-focused advisors, Elon Musk and Vivek Ramaswamy, appear keen on mirroring his budget adjustments in the United States.
Argentina's main stock index, Merval, ended over 7% higher on Monday, marking a 174% rise for the year. This upward trend has occurred as investors welcome Milei's radical transformations.
Milei inherited an economy in turmoil, dealing with hyperinflation reaching 211% in December 2020, which was exacerbated by previous governments' excessive money printing to finance expenditures. The International Monetary Fund, Argentina's major creditor, acknowledges that Milei has surpassed expectations.
As per the IMF, which provided Argentina with a bailout in 2018 – the fund's largest one ever – the overall economy will shrink by 3.5% this year, following a 1.6% decline in 2020. A projected 5% growth in 2022 will, in essence, offset those losses.
Economists add that to attract substantial foreign investment, Argentina requires lifting capital controls, which constrain foreign currency movement into and out of the country, and releasing the exchange rate, still tied to the dollar.
Increased business investment is crucial for sustaining robust economic growth and improving livelihoods, which will eventually be essential for Milei to maintain public approval and for his party to secure a stronger majority in midterm elections happened later in 2022.
The approval from the incoming US President and his efficiency-focused advisors, Elon Musk and Vivek Ramaswamy, suggests a potential interest in replicating Milei's budget adjustments in the United States' business sector. The need to lift capital controls and release the exchange rate, as suggested by economists, could attract more foreign investment into Argentina's economy, positively impacting businesses and the overall economy.
