London
Argentina has come out of a deep recession in a major victory for the country’s unorthodox President Javier Milei, who has spent the past year enacting sweeping and painful reforms in Latin America’s third-largest economy.
Gross domestic product grew 3.9% in the July-to-September quarter compared with the previous three months, Argentina’s statistics agency said Monday. The agriculture and mining sectors drove the expansion, with consumer spending also growing strongly. But manufacturing and construction suffered sharp declines in output.
The news of the economic rebound comes a year after Milei was elected on a ticket to tackle chronic hyperinflation and overhaul the long-suffering economy. He has slashed government spending, reducing sky-high inflation and helping repair the country’s finances. But these measures have also pushed up unemployment and the poverty rate.
The economist has won praise from US President-elect Donald Trump, whose government efficiency tsars, Elon Musk and Vivek Ramaswamy, appear keen to replicate his budget cuts in the United States.
Argentina’s flagship Merval stock index, which tracks around two dozen of the country’s most valuable listed companies, closed more than 7% higher Monday. So far this year, the index is up 174% as investors have welcomed Milei’s radical reforms.
Milei inherited an economy in crisis, racked by hyperinflation that reached 211% last December and which was fueled by previous governments’ money printing to fund spending. According to the International Monetary Fund, the country’s biggest creditor, he has delivered “better-than-expected results.”
The IMF, which approved a bailout for Argentina in 2018, the fund’s biggest ever, sees the economy shrinking by 3.5% overall this year, following a 1.6% contraction last year. Projected growth of 5% next year will, in simple terms, just about reverse those declines.
Economists say Milei’s government must lift capital controls, which limit the flow of foreign currency into and out of the country, and free up the exchange rate, still pegged to the dollar, if it wants to attract meaningful investment into Argentina.
More business investment is key to delivering a sustained boost to economic growth and improving living standards, which will ultimately be necessary for Milei to enjoy ongoing public support and for his party to win a bigger majority in midterm elections late next year.
