In February, Argentina’s economy continued to contract for a fourth month in a row as President Javier Millei’s economic shock therapy plan began to take effect. Despite the ongoing recession, data released on Tuesday showed that economic activity fell only 0.2% from a year earlier, less than the 6% decline expected by analysts polled by Bloomberg. This was due in part to the measures implemented by Miley since taking office in December, including lifting price controls and freezing public works, which helped reduce monthly inflation from a three-decade high of 26% in December.
Miley has also allowed public sector wages and pensions to lag behind rising consumer prices, with the aim of further cutting costs. In his televised address Monday night, Miley hailed this as the country’s first quarterly fiscal surplus since 2008, seeing it as a key step in the fight against inflation. However, economists are more cautious about the sustainability of this surplus and its impact on economic activity. In February, construction activity decreased by 24.6% year-on-year, and consumption in small and medium-sized enterprises fell by 12.6% in March.
Economists polled by Argentina’s central bank forecast a 3.5 percent decline in gross domestic product this year according to a survey conducted in March. Despite Miley’s optimism about the surplus and its impact on inflation, there is still great concern among experts about the economic impact of his austerity measures on employment and growth prospects for the future.
Since taking office in December, Miley has implemented measures such as lifting price controls, freezing public works and devaluing the currency as part of an economic shock therapy plan aimed at reducing inflationary pressures on Argentine economy. The fourth month contraction of GDP was expected but it came at lower than anticipated level of -6%. The data shows that monthly decline in economic activity was only -0.2%, which is less than what analysts had predicted.
In his televised address Monday night, President Miley celebrated this first quarterly fiscal surplus since 2008 as an important step towards fighting inflation which has been an issue for long time for Argentina.
However economists are cautious about sustainability of this surplus on economic growth prospects for future as it had significant impact on construction activities that decreased by -24.6% year-on-year and consumption in small and medium sized enterprises which constitute largest employment sector fell by -12.6%