Argentina under Milei: economic successes and the remaining challenges ahead

Mar 26

Argentina’s economy keeps on exceeding expectations. President Javier Milei, after over a year in office has enacted drastic reforms, finally bringing Argentina out of a deep recession. Slashing public spending and applying a tight fiscal policy, among other measures, have had their success as mounting evidence and economic indicators have shown. However, these successes have not come without a sacrifice, and indeed, those on lower incomes have had to bear the brunt of these brutal policies, with poverty and unemployment rates spiking during his first months in power. Although additional challenges remain to ensure that this recovery is sustained in the long run, it is evident that, slowly but surely, Milei’s drastic macroeconomic stabilization measures which were initially thought of as crazy and improbable, have already started to work.

Economic successes

Inheriting an economy with a 211% annual inflation rate and a monthly inflation of 13%, Javier Milei took office in December 2023 (BBC, 2024). Having famously boasted about his chainsaw approach to slashing public spending and promising to lower inflation, over a year into his Presidency, Milei has surprisingly managed to do just that.

GDP Growth

Argentina’s economy has stagnated for decades, with GDP per capita in 2023 at around the same levels as in 2006 (World Bank, 2024). Despite benifi,ting from having abundant natural resources and competitive agricultural and energy sectors, growth has been constrained by capital and exchange rate controls and other policies that have distorted trade and free market dynamics and which have come hand in hand with persistent fiscal deficits and hyperinflation (World Bank, 2024).

To tackle this, Milei started by cutting the number of government ministries by half (Plummer, 2024) and in total, slashing public spending by a third (BBC, 2024). He also made it a priority to introduce more free trade and liberalisation policies that had hindered the economy’s potential for decades. Other measures included the deregulation of key industries such as the energy sector, making the labour market less rigid and introducing tax reforms to incentivise investment (FocusEconomics, 2024).

Together with other fiscal and monetary policies which will covered below, this swift action shocked the economy, which contracted before it adjusted and started growing in the last months of 2024. In fact, in the short period of July-September 2024 alone, Argentina’s GDP grew 3.9% compared with the previous three months (Ziady, 2024).

Currently, Argentina’s economic outlook for 2025 is very positive, with growth projected at 5% and 4.7% in 2026. Economic activity is expected to continue to be boosted by the agricultural, mining and energy sectors (World Bank, 2025). Consumer spending is also significantly on the rise (Ziady, 2024). This is a direct result of macroeconomic stabilization measures, new business friendly legislation and the expectation that the government will maintain its tight fiscal policy approach, thereby continuing to build its credibility and impact (World Bank, 2025).

The following graph shows the evolution of real GDP per capita and of the international, lower and upper middle-income poverty rates between 2007 and 2025:

Inflation Reduction

Monthly inflation rates in Argentina in December 2023 were 13%. After Milei came into office, the complete and abrupt policy shift caused inflationary pressures to spike, reaching a peak of 25% of monthly inflation (BBC, 2024). This was a result of a combination of measures such as lifting exchange controls, which, when balancing with inflation reduction, is a complex task (World Bank, 2024). In effect, things got worse before they got better, and the annual inflation rate in Argentina hit 289.4% in April 2024, one of the highest in the world (Plummer, 2024).

Ever since, inflation has been falling consistently. The economy has had more time to adjust and respond favourably to Milei’s macroeconomic stability measures, and now, the outlook of annual inflation for 2025 is of 23.3% (Reuters, 2025).

The evolution of annual inflation rates in Argentina between February 2024 and February 2025 are shown below:

Debt and deficits

To tackle budget and trade deficits, Milei eliminated price controls, subsidies, tariffs, and export restrictions, and cut local government budgets tenfold (Dedovic, 2024). The effects have been clear. Earlier last year, Argentina achieved its first budget surplus in over a century, totalling $3 billion (Dedovic, 2024). Just a year before, the deficit amounted to $120 billion (Plummer, 2024). More recently, in December 2024, it was announced that Argentina had also achieved a trade surplus of $18.9 billion in 2024, coinciding with his first 365 days in the Presidency, and as a symbol for the success of his economic policies so far (Reuters, 2025).

In the financial markets, Argentina’s Merval stock index, which includes two dozen of the country’s most valuable listed companies, is up 174% (Ziady, 2024). Furthermore, since December 2024, which marked his first year in office, more and more financial institutions have recognised his economic successes in debt management and external finances and adjusted their risk-assessments and forecasts accordingly. The credit rating agency Moody’s raised Argentina’s long term foreign currency sovereign credit rating for the first time in 5 years, giving as justification the government’s policy shift and the resulting stabilization of the country’s external finances (Reuters, 2025). Similarly, S&P also confirmed its rating upgrade for Argentina, citing reduced foreign currency risks (S&P Global, 2025).

Even the IMF, which carried out its biggest bailout on record for Argentina in 2018 admitted Milei had achieved “better-than-expected results” (Ziady, 2024). This international recognition has been growing in proportion to the evidence-based success of Milei’s implemented policies.

Social effects: poverty and unemployment

While Milei’s policies have been severe on inflation, public spending, and public debt, they have also proven to be so for its poorest citizens. As he cut costs, he also slashed jobs, putting thousands in unemployment. Driven by job losses in the public sector, unemployment spiked from 7.3% in late 2023 to 9.1% in early 2025 (INDEC, 2024).

Poverty rates also increased. In his first trimester in power, poverty rose 11 points, the biggest jump in 20 years, in a country where over half of the population was already living in poverty (BBC, 2024). In his first semester, 52.9% of the population was below the line of poverty, that is, more than 15 million Argentinians (INDEC, 2024).

Milei’s cuts to public subsidies and transfers have disproportionately affected lower-income households, amplifying the economic hardships endured by a population that was already dealing with years of chronic hyperinflation. However, the worse seems to be over. By trimesters, in the first of 2024, poverty was at 54%. Since then, it decreased slightly to 51% in the second trimester and dropped further to 38.9% in the final 4 months of the year (Ministerio de Capital Humano, 2024).

Future challenges

The challenge for the continued success of Milei’s measures, aside from geopolitical developments that could hinder the performance of the Argentinian economy like tariffs or supply shocks, is sustaining this growth in the long term, and in particular, achieving this through attracting more FDI into the country.

While the effects of the new measures stabilize and the economy adjusts, investors remain cautious, waiting for stability. Indeed, this was signalled by the amount of FDI flows that came into the country, which were only slightly higher than the previous year. Investors and indeed many Argentinian citizens need to be reassured that the significant positive changes experienced in the last year will be maintained in the long run (Dedovic, 2024).

In addition, economists also call for the lifting of capital controls, which limit the flow of foreign currency in and out of Argentina, and for the exchange rate to be freed up, given that it still is tied to the US dollar. These measures would also be essential in order to incentivise serious investment into the country in the near future (Ziady, 2024).

While there is no argument that Argentina’s economy has experienced an astounding recovery, notably in reducing sky-high inflation, stabilizing its external finances, and boosting growth, there is still a long way to go. Crucially, the objective of sustained economic growth remains, since some investors are still wary that the strong rebound of the economy could normalise after this initial positive response. The effects of Milei’s policies therefore must endure the hardest test of all: time.

References:

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Reuters. (2025, March 10). Argentina analysts see 2025 inflation at 23.3%. Reuters. Retrieved from https://www.reuters.com/world/americas/argentina-analysts-see-2025-inflation-233-2025-03-10/

Reuters. (2025, January 24). Moody's raises Argentina's rating for the first time in five years. Reuters. Retrieved from https://www.reuters.com/markets/rates-bonds/moodys-raises-argentinas-rating-first-time-five-years-2025-01-24/

S&P Global. (2025). Argentine Banks Upgraded To 'B-' On Lower Risk To Foreign Currency Access; Outlook Stable. Rating Action. Retrieved from https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/3319579

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Ziady, H. (2024, December 17). Argentina exits recession in win for libertarian president Milei. CNN. Retrieved from https://edition.cnn.com/2024/12/17/economy/argentina-exits-recession-milei-intl/index.html

Written by Laura Rebollo

Theia Consulting Group