Argentina enters technical recession; Unemployment increases under Milei policies

Argentina entered a technical recession in the first quarter of the year, official data showed this Monday, and job losses increased amid a harsh austerity campaign undertaken by the government of libertarian Javier Milei, who is prioritizing restoring the fiscal order.

The gross domestic product (GDP) of the South American country contracted 2.6% in the first quarter of the year compared to the last quarter of 2023, the second consecutive quarter-on-quarter contraction, the usual definition of recession.

The quarter marks the first full term under Milei, who took office in December after winning a surprise election last year, when he often campaigned with a chainsaw as a clear illustration of his plans to cut spending and reach a zero fiscal deficit.

Official statistics agency INDEC also released employment data, which showed the unemployment rate rose to 7.7% in the first quarter, up from 5.7% at the end of last year. This means about 300,000 new unemployed people since the previous quarter.

Triple-digit inflation and recession have hit consumers hard and hurt sales of products like beef, while Milei’s spending cuts have led to the halting of state infrastructure projects and significant job losses in sectors like the construction.

Milei, a libertarian economist, has argued that the country needs to get its finances in order after years of fiscal deficits that have led to regular sovereign debt defaults and damaged the country’s reputation with global investors.

In addition, it has implemented the largest austerity program in recent decades in the South American country with the primary objective of lowering inflation. In May it was 4.2%, the lowest monthly rate since January 2022, and warned that this would require painful measures until a rebound in activity was achieved in the second half of this year.

The drop in salary and pension income after the devaluation of the Argentine peso, with the immediate acceleration of inflation in December, slowed consumption, causing layoffs in industry and commerce.

Milei, who is on tour in Prague, Czech Republic, stated this Monday that “hand in hand with the ideas of freedom and technological progress, but above all with the ideas of freedom, free markets and respect for private property and life, with these moral values, Argentina will emerge from its dark present to become the most brilliant case in the history of humanity to become rich again.”

Since taking office, he has tried to stimulate markets with his fierce focus on a fiscal surplus. Bonds and stocks have rallied strongly, but the economy has taken a hit and poverty and homelessness have increased.

Milei maintains that strict fiscal medicine is necessary and that the economy will begin to recover.

According to official data, unemployment affects 1.1 million Argentines, although this figure is relative given the high percentage of informal workers.

Within the universe of unemployed, 8.4% are women and 7% men, mostly inhabitants of Buenos Aires and its surroundings.

INDEC data showed the economy fell 5.1% year-on-year in the first quarter, slightly exceeding analysts’ forecasts for a 5.25% contraction.

Private consumption fell 6.7% annually in the quarter, while public consumption fell 5%, the data showed. Imports also decreased by 20.1%, but exports increased by 26.1%.

[Con información de Reuters y AP]

Connect with the Voice of America! Subscribe to our channels Youtube, WhatsApp and to the newsletter. Turn on notifications and follow us on Facebook, x and instagram.