Economy slumped for fourth straight month in February, reveals INDEC

Argentina’s economy slumped for a fourth straight month in February as President Javier Milei’s economic shock therapy plan took hold.

Economic activity fell 3.2 percent in February from a year ago, less than expectations for a six-percent drop, according to analysts surveyed by Bloomberg.

On a monthly basis, activity declined 0.2 percent, according to government data published by the INDEC statistics bureau on Tuesday.

Argentina’s economy contracted 1.9 percent in the fourth quarter of 2023.

Since taking office in December, Milei lifted price controls, froze public works and sharply devalued the currency. His austerity measures helped cool monthly inflation in the first three months of the year, falling from a three-decade high of 26 percent in December.

Milei used high inflation to further skim costs by letting public wages and pensions fall far behind monthly rises in consumer prices. The effort is, according to Milei, paying off. The president went on national television Monday night to trumpet the country’s first quarterly fiscal surplus since 2008. The surplus, the President said, is the key to eradicating inflation, the source of perennial crisis in Argentina.

Economists are more cautious. They interpret the fiscal surplus as good news but worry about its sustainability, given its crippling impact on economic activity. Construction activity slumped 24.6 percent annually in February and spending at small- and medium-sized businesses — Argentina’s largest sector of employment — fell 12.6 percent in March.

Economists surveyed by the Central Bank forecast gross domestic product contracting 3.5 percent this year, according to a March poll. The International Monetary Fund expects the economy to contract by 2.8 percent in 2024.