“We will give President Milei’s government the necessary tools so that it can reform the state once and for all,” said the leader of the ruling bloc, Gabriel Bornoroni. Politically, this green light constitutes “a total success for the government”, political scientist and economist Pablo Tigani told AFP.
But in the economic field, “it will be a return to the policies of the 1990s with deregulation, privatization and unconditional opening of the economy which will deal a hard blow to industry and to small and medium-sized national enterprises,” he said.
All-out austerity
Even before the adoption of this package, Mr. Milei congratulated himself on having achieved “the largest fiscal adjustment not only in the history of Argentina, but also in the history of humanity.”
His government immediately applied a drastic all-out budget austerity program, with the aim of “zero budget deficit” by the end of 2024, and thus taming chronic inflation (211% in 2023).
But budget cuts, including the paralysis of public projects, coupled with a brutal devaluation (54%) of the peso in December, have strangled purchasing power. An impact which has repercussions on consumption, activity and employment.
Suffering country
Inflation in Argentina continued in May the gradual deceleration that began five months ago, to 4.2% over one month, the lowest in two and a half years, but which remains crushing over one year, at 276.4%.
But consumption and activity are plummeting. Recession is setting in, with the economy contracting by 5.3% in the first quarter compared to the same period last year.
Argentina’s gross domestic product (GDP) contracted by a sharp 5.1% year-on-year in the first quarter, while unemployment now stands at 7.7% of the population, according to official figures released Monday.
Opposition and social movements are citing a country in pain, with poverty increasing rapidly since the end of 2023, to 55.5% of the population in the first quarter of 2024, compared to 44.7% a year earlier, according to the Catholic University’s Social Debt Observatory (ODSA-UCA).
