Argentina's economy shrank by 0.6% in the second quarter compared with the first, coming in better than analysts' median expectation of a 0.9% decline, per figures released Thursday. Compared with a year earlier, activity still rose 2.0%.
Trade was the bright spot. Sales abroad added to growth and a pullback in imports supported the quarterly reading. By contrast, spending by the state, consumers and businesses all moved lower on the quarter.
Soft growth has become part of the cost of President Javier Milei's push to rein in inflation and wipe out chronic deficits. He has tightly managed the peso, which has strengthened in real terms, and moved a historically protected economy toward more exposure to global competition.
That mix has stung sectors that employ the most people. Manufacturing, retail and construction have been hit hard by a stronger currency and increased foreign competition, leading to job losses. Meanwhile, energy, mining and agriculture are powering exports to record levels but do so with far fewer workers.
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Bloomberg Economics' Jimena Zuniga put it this way: "Argentina's GDP report confirmed a weak second quarter, but revealed little to help gauge growth ahead. Given strength in primary sectors and little signs of broader growth, we expect economic performance to remain decent, though unspectacular in coming quarters. That's unlikely to raise alarms for the fiscal or political outlook. It also doesn't augur smooth sailing toward reelection for President Javier Milei in 2027."
On Tuesday, the government trimmed its projection for 2026 growth to 3% from 5% in the yearly budget plan it forwarded to Congress. Private forecasts are cooler on this year too: the central bank's monthly surveys now point to 2.1% growth for 2024, down from 3.5% expected last December. Early third quarter reads are soft as well, with construction and manufacturing sliding sharply in July and August tax intake flat after adjusting for inflation.
For your wallet, this mix suggests an economy leaning on export engines while big employers struggle. That can shape everything from local demand to currency moves, which in turn ripple into prices on goods and travel.
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