(Bloomberg) -- Argentina’s economy sunk deeper into recession in the second quarter as ripple effects from President Javier Milei’s currency devaluation and austerity exacerbated a downturn.
Gross domestic product declined 1.7% in the three months through June compared to the previous quarter, in line with analysts’ expectations. From a year ago, the economy also shrank 1.7%, according to government data published Wednesday. It marks the third straight quarterly contraction in Argentina.
Capital investment, consumer spending and government expenditure all contracted on a quarterly basis while rising exports during Argentina’s harvest season helped offset some of the decline.
Argentines are enduring their sixth contraction in the past 10 years. Besides the pandemic, this year’s sharp decline stands out after Milei took office in December, devalued the peso 54% and slashed government spending across the board, paralyzing several industries like construction and manufacturing. Milei hasn’t paid a political cost yet after he bluntly warned citizens during his inauguration address that his so-called “shock therapy” would indeed be painful.
Milei’s ability to continue lowering inflation while rebooting the economy in the second half of the year will prove key to maintaining his approval ratings around 50% despite the dire state of South America’s second-biggest economy. He acknowledged in a speech last Sunday that half of Argentina’s 46 million citizens live in poverty.
His administration projects GDP declining 3.8% this year before posting 5% growth in 2025, according to its annual budget released Sunday. Economists surveyed by Argentina’s central bank see more modest growth next year at 3.5%.
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