Six Months On – Has Milei Improved Argentina’s Outlook?
Violent clashes have marked President Javier Milei’s six months in charge of Argentina, as protests continue in Buenos Aires over his controversial economic reform package, but is the shock therapy improving Argentina’s outlook?
Milei did not hide his determination to reform the country through austerity measures during last year’s presidential election campaign, stating ‘the changes our country needs are drastic’. At one point he even brandished a chainsaw to demonstrate his drive to cut public spending.
Shortly after coming to power, he devalued the Argentinian peso by 50%, slashed state fuel subsidies, and halved the number of government ministries. Further reform measures have included declaring a state of economic emergency, cutting pensions and diluting labour rights.
The immediate reduction in public spending helped Argentina move out of a fiscal deficit. Last December, the difference between the government’s spending and income was a deficit of $120 billion and by this April it had become a surplus of around $290 million.
Also in April, inflation had reduced to a month on month rate of 8.8%, the first time it has been under double figures in 6 months, and in May the International Monetary Fund (IMF) gave the government high praise when stating that the country’s performance was “better than expected” and that its economic programme was “firmly back on track”.
However, despite the monthly improvement in inflation for April, the more globally recognised annual rate was still at 269% and is now hovering around 300%. To put that into perspective, the UK’s current rate is 2.3% and the country was considered to be in a ‘cost of living crisis’ when inflation rose to over 10% in 2022/23.
There is also evidence to suggest that Argentina’s economy has declined sharply since the arrival of the new government, although official figures are yet to be published, and it has been reported that over half of the country are now living in poverty.
Many economists suggest that Argentina’s economy has been mis-managed for over a century, with previous governments spending well beyond their means, financed by the central bank effectively printing money.
Therefore, the incredibly difficult challenge for Milei, who does not have a majority in congress despite receiving around 56% of the vote, is convincing Argentina’s population that they should continue to pay for the mistakes that were made in the past.
While campaigning for the need to reform government is the policy which meant Milei was elected, the recent protests, riots and violence suggest that not everybody is on board.
