Argentine economy surprises negatively again and falls 3.9% in June

Argentina’s economic activity fell 3.9% in June compared with the same period in 2023, official data showed on Wednesday (21). The June drop was double the 1.9% contraction expected by analysts polled by Reuters.

The biggest drop predicted in the survey estimated that the struggling economy led by President Javier Milei would shrink by 3.2%, which shows frustration in the unrealistic expectations of market agents.

The result comes after the Argentine economy posted an annual increase of 2.3% in May, a rare move given that the country had experienced six consecutive months of declines in economic activity.

That month, the increase was driven by the agricultural and livestock sector, which soared 100% year-on-year, overcoming a period of severe droughts the previous year, which damaged crops.

Now, the below-expectations result for the economy reflects the harsh austerity measures that Milei promoted to achieve the fiscal surplus. The measures hit consumption as well as the key sectors of construction and manufacturing.

According to the Argentine Chamber of Medium-Sized Enterprises, retail sales fell 15% in July compared to the same period in 2023, and 17% year-to-date. Salaries and pensions have fallen significantly, and thousands of layoffs have occurred. Today, 41.7% of Argentina’s 46.7 million people live below the poverty line.

Construction fell nearly 24% year-on-year in June, while industrial activity fell 20% in the month.

According to Social Security data, more than 600,000 people stopped contributing in the last six months, which could mean job loss or a transition to informal employment.