Milei's Argentina: economic analysis 2024-2026

Introduction

On 10 December 2023, Javier Milei, a libertarian economist and political outsider, was sworn in as President of Argentina. He inherited a country in critical macroeconomic conditions: annual inflation at 211.4%, a debt/GDP ratio of 155.4%, poverty at 41.7% of the population and international reserves down to $23.1 billion. Argentina was, in short, on the brink of a new financial crisis.

Milei responded with an unprecedented orthodox fiscal shock: an initial 118% devaluation of the peso, drastic public spending cuts, elimination of subsidies and a hiring freeze in the public sector. The stated goal was to break the inflation-devaluation-deficit spiral that had plagued Argentina for decades.

More than two years in, the results on the nominal front are undeniable: monthly inflation has collapsed, the fiscal balance is in surplus for the first time in a decade, country risk has fallen significantly. The initial social cost was brutal -- poverty reached 52.9% in the first half of 2024 -- but the recovery was equally rapid: by H1-2025, INDEC poverty fell to 31.6%, the strongest reduction in 20 years. However, deep structural fragilities remain: labour informality at 43.2%, negative net reserves, outgoing FDI.

This analysis examines all the main macroeconomic indicators, comparing data from IMF, OECD, World Bank and INDEC, to provide a balanced assessment of the first two years of the Milei presidency.

1. GDP and growth: from recession to rebound

The Argentine economy went through a deep but brief recession in Milei's first year. Quarterly data tell a two-part story: GDP fell by −2.2% in Q1 2024 and −2.4% in Q2, then rebounded strongly at +3.6% in Q3 and +2.0% in Q4.

On an annual basis, 2024 closed at −1.3%: a significant contraction, but less severe than feared. For context, Argentina had already recorded −9.9% in 2020 (COVID) and −1.6% in 2023 (last year of the previous government). The country entered the Milei era already in recession.

It is important to distinguish between technical rebound and structural growth. A technical rebound occurs when an economy recovers ground after a collapse: positive numbers reflect a return to previous levels, not new expansion. Structural growth indicates a sustainable increase in productive capacity. 2025 data (Q1: +1.1%, Q2: −0.1%, Q3: +0.3%) suggest that, past the rebound, growth is normalising at more modest levels.

Estimates compared: what international institutions say

The consensus is clear: all institutions forecast growth between +4.4% and +5.5% in 2025, and between +3.5% and +4.3% in 2026. BBVA Research is the most optimistic (+5.5%), while IMF and Allianz Trade are the most cautious (+4.5% and +4.4%).

2. Inflation: the most visible victory

If there is one result that defines Milei's first two years, it is the collapse of inflation. Argentina lived with triple-digit inflation: 211.4% annually at end-2023. By June 2025, the monthly rate had fallen to 1.5% -- a level not seen in years.

The decline was rapid but not linear. After the December 2023 devaluation shock (25.5% in a single month), inflation fell steadily: 20.6% in January, 13.2% in February, 11.0% in March. It reached single digits in April 2024 (8.8%) and fell below 3% in October 2024 (2.7%).

The causes of this disinflation are manifold:

• Exchange rate anchoring: the crawling peg (programmed 2% monthly devaluation) provided a price reference point
• Monetary tightening: the BCRA maintained high rates, draining liquidity from the system
• Demand collapse: the recession and falling real wages curbed consumption, removing pricing power from businesses

Annual inflation as of September 2025

BCRA policy rate

The Central Bank accompanied disinflation with a gradual policy rate reduction: from 117% in December 2023 to 29% in February 2025. The rate remains elevated in absolute terms, but the trajectory is consistent with the inflation decline.

Primary spending

Inflation forecasts

Estimates for end-2025 diverge: OECD forecasts an annual average of 37%, Allianz Trade targets 20% by year-end, the BCRA survey indicates 28.6%. For 2026, the consensus is between 15% and 18%: still elevated by international standards, but an order of magnitude lower than two years ago.

3. Public finances: the first surplus in a decade

The restoration of public finances is the second pillar of Milei's strategy. The primary balance went from −2.7% in 2023 to +1.8% in 2024: a 4.5-point GDP adjustment in a single year. Including interest, the overall balance was positive at +0.3%, the first total surplus in over a decade.

How did it get there? Mainly through spending cuts:

• Transfer cuts to provinces and local authorities
• Public sector layoffs and hiring freeze
• Infrastructure works freeze
• Real pension cuts: with high inflation and insufficient adjustments, pensioners' purchasing power collapsed
• Elimination or reduction of subsidies on energy and transport

The target agreed with the IMF for 2025 was a primary surplus of 1.3% of GDP. Argentina already exceeded it in 2024 with 1.8%. Estimates for 2025-2026 indicate maintaining the surplus at around 1.6-1.7%.

4. Public debt: apparent decline and real risks

Argentina's debt/GDP ratio fell from 155.4% at end-2023 to 91.5% at end-2024: almost 64 points in a single year. A spectacular decline on paper, but one that requires careful reading.

The mechanism is largely accounting-based. In 2023, the devaluation crashed dollar-denominated GDP, artificially inflating debt/GDP. In 2024, exchange rate stabilisation and nominal recovery pushed dollar GDP back up, reducing the ratio. This is mostly not actual debt repayment.

IMF estimates project a further decline to 78% in 2025 and 68% in 2026. But the real risk lies in maturities: in 2026 Argentina must pay $15 billion in external debt, of which $4.1 billion to the IMF. This represents 2.3% of GDP and constitutes the main stress test for reserves sustainability.

5. Poverty, extreme poverty and structural fragilities

5a. INDEC vs UCA-ODSA: two measurements, two stories

To understand Argentine poverty data, one must know the two main sources, which are often cited interchangeably but measure different things.

INDEC (Instituto Nacional de Estadística y Censos) is the official statistical agency. It publishes biannual poverty data, calculating the Canasta Básica Total (CBT) based on a 2004/05 expenditure structure. The INDEC poverty threshold is around $1,276,649 pesos per month for a typical family.

UCA-ODSA (Observatorio de la Deuda Social Argentina, Catholic University) publishes quarterly estimates, using an expenditure structure updated to 2017/18. This leads to higher thresholds — about $1,942,000 pesos — and consequently poverty rates systematically 4-5 percentage points higher than INDEC.

5b. The time dynamics: when it rose and when it fell

Here lies the heart of the debate, as well explained on the “EconomiaItalia” channel last year: the frequency of data changes the narrative.

Biannual INDEC reading:

• H2-2023: 41.7% → H1-2024: 52.9% = +11.2 pp (the spike)
• H1-2024: 52.9% → H2-2024: 38.1% = −14.8 pp (record drop in 20 years)
• H2-2024: 38.1% → H1-2025: 31.6% = −6.5 pp (lowest since 2018, strongest reduction in 20 years)

Quarterly UCA reading:

• Q4-2023: 45.2% → Q1-2024: 54.9% = peak concentrated in 3 months
• Q1-2024: 54.9% → Q2-2024: 51.0% → Q3-2024: 49.9% = decline already from Q2

5c. Extreme poverty: those who cannot even eat

Extreme poverty measures an even more severe condition: being unable to cover even basic food needs. The dynamic is similar, with a violent peak and rapid recovery.

INDEC (biannual):

• H1-2023: 9.3% → H1-2024: 18.1% (doubled)
• H1-2024: 18.1% → H2-2024: 8.2%
• H2-2024: 8.2% → H1-2025: 6.9%

UCA (quarterly):

• Q4-2023: 14.6% → Q1-2024: 20.3% (peak)
• Q1-2024: 20.3% → Q3-2024: 12.9%

5d. Child poverty: the most dramatic figure

Children and adolescents are the hardest hit group. The numbers are the most painful in the entire analysis.

• H2-2024 (INDEC/UNICEF): 52.7% of minors in poverty — a 14 pp drop, about 1.7 million minors lifted out of poverty
• Q3-2024 (UCA): still 65.5% in poverty, 19.2% in child extreme poverty
• H1-2025 (INDEC): 45.4% (under 14)

Inequalities are enormous. INDEC/UNICEF data from H2-2024:

5e. The role of social transfers

The impact of the shocks was partially cushioned by welfare programmes, particularly AUH (Asignación Universal por Hijo) and Tarjeta Alimentar.

Without these transfers, child extreme poverty would have been about 10 percentage points higher — meaning about 1 million more children in extreme poverty.

The government significantly increased AUH during 2024:

• Gennaio 2024: +100%
• Marzo 2024: +27%
• Giugno 2024: +41%

These increases, combined with slowing inflation, contributed to the purchasing power recovery of the most vulnerable families in the second half of 2024.

5f. Real wages

Real wages followed the same V-shaped trajectory as poverty. The index (base 100 in October 2023) plunged to 85 in December 2023 with the 118% devaluation shock. Recovery was slow: 89 in June 2024, then 101.5 in December 2024 when nominal wages (+145.5%) finally surpassed cumulative inflation (117.8%). By June 2025 the index reached 106, above pre-crisis levels.

6. Labour market: the real Achilles' heel

Official unemployment

Unemployment is slightly declining: 7.6% in Q2-2025 (from 7.9% previously). The employment rate stands at 44.5%. But the headline figure only tells part of the story.

Informality: the structural problem

Argentina has an informal employment rate of 43.2%. This means over 4 in 10 workers have no regular contract, social security contributions or protections. These workers do not appear in unemployment statistics: if they lose their informal job, they are not counted as "unemployed" but simply leave the labour force.

According to CIPPEC, private formal employment has been stagnant for a decade, while monotributistas (self-employed under a simplified regime) have grown by +64% since 2010 — a sign of disguised casualisation. CEPA reports that private formal employment is slightly declining in 2024, with only partial recovery in 2025.

Official unemployment therefore systematically underestimates the real problem in the Argentine labour market. As long as informality remains above 40%, large segments of the population remain excluded from the formal recovery and the benefits of macroeconomic reforms.

7. External sector: trade, reserves, exchange rate and the US swap

7a. Trade balance and current account

In 2024 Argentina recorded a record trade surplus of $18.9 billion, thanks to exports of $79.7 bn and imports compressed to $60.8 bn (recession effect). In 2023 the balance was negative (−$6.9 bn). In 2025 the surplus fell to $11.3 billion: the strong peso makes imports cheap and exports expensive, eroding competitive advantage.

The current account (which includes trade in goods, services, income and transfers) tells a more worrying story. After positive quarters in 2024 (Q2: +$3.73 bn), the balance plunged to −$5.19 bn in Q1-2025, then to −$3.02 bn in Q2 and −$1.58 bn in Q3. The current account moved from surplus to deficit: a signal that the growth model based on a strong peso has a structural cost.

7b. The exchange rate regime: 5 phases

Argentina's exchange rate policy under Milei has gone through five distinct phases, each with its own logic and risks:

1. December 2023 – Shock devaluation: from 366 to 800 ARS/USD (−54%). A brutal correction to realign the official rate with the parallel market and signal credibility.
2. January 2024 – January 2025 – 2% monthly crawling peg: programmed 2% monthly devaluation, but inflation remained much higher (from 25% to 2.7%). Result: the peso appreciated strongly in real terms.
3. February – April 2025 – 1% crawling peg: slowdown of programmed devaluation. The real appreciation of the peso accelerates further.
4. April 2025 – Managed band 1,000-1,400 ARS/USD: as part of the IMF agreement, the government shifts to an oscillation band. The peso stabilises around 1,065-1,190 ARS.
5. January 2026 – Indexed band: the band is pegged to INDEC inflation with a 2-month lag, to prevent further real appreciation.

7c. The multilateral real exchange rate (ITCRM)

The ITCRM (Indice del Tipo de Cambio Real Multilateral) is the key indicator for measuring Argentina's price competitiveness against its 12 main trading partners: Brazil (32%), Eurozone (19%), China (16%), USA (12%) and others.

By December 2025 the ITCRM fell to 58.6, the lowest level since the convertibility of the 1990s. For comparison, the all-time low was 41.1 in October 2001, one month before the default and the end of convertibility.

7d. Reserves: the black hole

BCRA gross reserves rose from $23.1 billion (end-2023) to $32.3 billion (December 2025), passing through a peak of $40.374 billion in September 2025 (pre-crisis). A nominal improvement, but the gross figure conceals a far more critical reality.

Net reserves — those actually usable by the central bank — are negative: −$2.4 billion according to JP Morgan. Gross reserves include money that is not truly the central bank's: commercial bank reserve requirements (savers' dollar deposits), the renminbi swap with China ($18 bn) and the one with the USA ($20 bn). Net reserves — those usable in a crisis — are negative.

For comparison, in 2019 gross reserves were $44.8 billion, with a significantly positive net component. Today Argentina has more foreign currency liabilities than assets.

7e. The September 2025 crisis

On 7 September 2025 La Libertad Avanza suffers a defeat in the Buenos Aires provincial elections, the country's most populous district. The market reacts violently:

• 10-year bond yields exceed 17%
• The peso loses 7% in a single day
• On 19 September the BCRA burns through $678 million in a single session — a 6-year record
• In just 3 sessions, the central bank loses $1 billion in reserves
• Pressure extends to the informal dollar market ("blue"), with the gap reopening

The crisis is stemmed by the announcement of the US swap and the subsequent victory in the October legislative elections, but it highlights the structural fragility: an unfavourable electoral result and a few market sessions are enough to put the entire system under pressure.

7f. The $20 billion US swap: Trump's "bailout"

On 22 September 2025, six days after the crisis peak and six days before the legislative elections, US Treasury Secretary Scott Bessent announces a $20 billion swap with Argentina. The agreement is signed on 20 October. By month's end, $2.5 billion has already been used.

How it works: the US Treasury's Exchange Stabilization Fund (ESF) purchases pesos from the BCRA in exchange for dollars. Argentina must return the dollars with interest. It is the largest bilateral US bailout since the Mexico rescue in 1995 under Clinton.

The geopolitical context is crucial: the US fears Argentina drawing closer to China. The pre-existing Chinese swap of $18 billion in renminbi was already being used to inflate gross reserves. Washington prefers to replace Beijing's influence with its own.

The opposition: 55-60% of Argentines are against the swap (national polls). In the US, 8 Democratic senators (including Elizabeth Warren) call for blocking the operation. Criticism also concerns the impact on American farmers: the swap strengthens a country that exports Argentine soy to China in competition with US farmers.

Krugman's verdict: temporary effects that postpone the reckoning without solving the structural reserves problem. Additional funds initially envisaged from private banks ($20 bn) were scaled down to $5 billion in repo form with JPMorgan, Citi and Bank of America.

2026 outlook: Milei stated that if country risk remains too high to issue on international markets, he will use the swap to pay upcoming maturities — "taking on debt to pay debt".

Debt maturities 2026

Argentina faces $15 billion in payments in 2026 (2.3% of GDP), of which $4.1 billion to the IMF. In the first half alone, payments to the Fund amount to $5 billion in principal and $3 billion in interest. Without new issuances or swap usage, usable reserves fall to critical levels in the first half of 2026.

8. Country risk and financial markets

Country risk EMBI

The EMBI+ spread (an indicator of market-perceived risk, measured in basis points, where 100bp = 1% premium over US Treasuries) fell from 1,907 bp in January 2024 to 550 bp in December 2025, after Milei's legislative victory. But volatility remains high: by March 2026 it rose back to 978 bp due to global turbulence.

Sovereign rating

S&P Global upgraded Argentina's rating to CCC+/C in December 2025, from the previous SD (Selective Default). It remains a very low "speculative grade" rating, but marks a path of normalisation.

Return to markets

Argentina returned to capital markets with the issuance of the Bonar 2029 bond for $1 billion — the first international issuance since 2018. A signal of confidence from bond investors.

9. The institutional framework

IMF programme

In April 2025 the International Monetary Fund approved a new Extended Fund Facility (EFF) of $20 billion for Argentina. It is a four-year programme with a first disbursement of $12 billion — the largest in recent history of IMF lending to the country. The programme requires a minimum primary surplus of 1.3% of GDP, a target Argentina has already exceeded by reaching 1.8% in 2024.

2025 legislative elections

The October 2025 elections marked a political turning point. La Libertad Avanza, Milei's party, obtained 41% of votes, doubling its parliamentary representation. This strengthens the government's ability to push forward structural reforms, including the RIGI law (Régimen de Incentivo para Grandes Inversiones), which offers tax incentives and regulatory stability for investments over $200 million.

Outlook and risks

The three main risks for the next 12-18 months are:

1. Reserves sustainability: With $32.3 billion in reserves and $15 billion in maturities in 2026, the margin is thin. The IMF disbursement is vital.
2. Real peso appreciation: The strong peso helps inflation but deteriorates competitiveness and the current account. If the trend continues, Argentina risks a new cycle of external imbalances.
3. Structural labour fragilities: INDEC poverty fell to 31.6% (H1-2025), the strongest decline in 20 years. But 45.4% of minors remain poor. Informality at 43.2% means large segments of the population do not benefit from the formal recovery. Private formal employment has been stagnant for a decade.

The outlook: If current conditions hold (regular IMF disbursements, declining inflation, post-electoral political stability), major international institutions forecast 4-5% growth in 2025 and 3.5-4.3% in 2026. But Argentina has already demonstrated multiple times in its history that stabilisations can be fragile.

Overall assessment