By Quasar Elizundia, Expert Research Strategist – Pepperstone
One year into Javier Milei’s administration, the Argentine economy presents a complex outlook, marked by significant progress on some fronts but also by the persistence of structural challenges that require continuous attention. The recent release of data by INDEC provides a nuanced view of the current situation.
The third quarter of 2024 showed a seasonally adjusted GDP growth of 3.9% compared to the previous quarter, driven mainly by fixed capital investment (with a seasonally adjusted increase of 12%) and a strong performance in real exports, which saw a remarkable 20.1% year-on-year increase. This surge in exports, with a 31.6% rise in November, reaching USD 6.479 billion, reflects the competitiveness of key sectors such as agriculture, agribusiness, and manufactured goods.
The robust growth in exports is an encouraging sign of the country’s productive capacity and its integration into international markets. This export dynamism, along with a 4.3% contraction in imports, has resulted in a trade surplus of USD 1.234 billion in November, reversing last year’s deficit and marking the twelfth consecutive month of a positive trade balance. This improvement in the trade balance is crucial for strengthening the country’s reserves and stabilizing the economy.
However, the 2.1% year-on-year contraction in GDP highlights the challenges that persist in the real economy. Sectors such as construction and wholesale and retail trade experienced significant declines of 14.9% and 6.1%, respectively, indicating weakness in domestic demand, partly attributable to the reduction in public spending. Private consumption, while showing a seasonally adjusted increase of 4.6%, also contracted 3.2% year-on-year. Gross fixed capital formation, critical for long-term growth, also fell 16.8% year-on-year, with sharp declines in construction and machinery and equipment. While the quarterly rebound is positive, the year-on-year GDP decline and weak investment suggest that the path to sustained recovery remains challenging.
On the labor front, the unemployment rate stood at 6.9% in the third quarter, its lowest level since Q4 2023, thanks to the strong performance of the agricultural sector. However, the 11.4% underemployment rate raises questions about job quality and the persistence of social difficulties. While the reduction in unemployment is progress, the high underemployment rate calls for policies that promote the creation of formal and quality employment.
The Milei administration faces the challenge of balancing necessary structural reforms with promoting sustainable and inclusive economic growth. While the optimism of international investors and the improvement in some indicators are positive signs, the sustainability of this progress will depend on the government’s ability to address macroeconomic imbalances, strengthen trade ties, and generate growth that benefits all sectors of society. Argentina’s economic future depends on the government’s ability to transform recent progress into a solid foundation for sustained and equitable growth.”
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