Argentina’s Economy Shrinks Again in May as Recovery Stumbles

Argentina’s economy contracted for a second straight month in May, underscoring the uneven nature of recovery under President Javier Milei. Economic activity fell 0.5 percent from April, according to government data published Wednesday by INDEC, missing the 0.2 percent rise estimated by Bloomberg Economics.

From a year ago, the gross domestic product proxy grew just 0.2 percent, far below the 2.5 percent median estimate of economists surveyed by Bloomberg. Agriculture and mining led annual growth, but manufacturing and retail posted declines, reflecting weak domestic demand.

Earlier indicators had already pointed to a mixed performance. Exports expanded, but weak imports and tax revenues signaled tepid consumer spending. Moody’s Ratings became the third major credit agency to upgrade Argentina’s credit score Tuesday, strengthening the case for a return to international debt markets.

Inflation slowed for a third straight month in June, reaching its lowest level since August — another win for Milei. But the labor market remains under pressure, with formal employment shedding nearly half a million jobs.

‘Another monthly contraction reflects volatile Argentine activity data more than a fundamental shift,’ said Jimena Zuniga, Argentina economist for Bloomberg. ‘Strength in agriculture and mining continues to be offset by weakness in manufacturing, limiting positive spillovers.’

Analysts warn the uneven growth could eventually trigger political shifts. Morgan Stanley analysts led by Fernando Sedano noted in a July 10 report that investors remain concerned about the sustainability of the recovery.

Article and image source: batimes.com.ar