By Hernan Nessi

Economic Outlook in Argentina

BUENOS AIRES (Reuters) – Argentina’s economic activity likely fell in June compared to the same month in the previous year, according to analysts. This reflects a return to negative growth after a rare positive rise the month before, attributed to stringent austerity measures implemented by libertarian President Javier Milei.

The median forecast from 16 analysts suggests a 1.9% decline year-on-year in June, following a 2.3% increase in May. The growth seen in the grains and gas sectors has been overshadowed by weak consumption and construction activities.

President Milei’s cost-cutting measures have led to rare fiscal surpluses and enabled the central bank to rebuild its reserves. However, this has come at the cost of significant downturns in consumption, construction, and manufacturing sectors.

“The economies of major cities, which are centrally linked to consumption and the industrial and construction sectors, continue to show a strong downward trend,” said Pablo Besmedrisnik, an economist at VDC consultancy.

On a positive note, agriculture is expected to recover from a low base recorded a year earlier, and the oil and gas sector is anticipated to grow due to increased shale production, according to Besmedrisnik.

Analysts’ forecasts for the economic activity range from a maximum drop of 3.2% to a maximum growth of 2.0%.

Juan Massot, research director at the Universidad del Salvador in Buenos Aires, indicated that while the economy’s decline is nearing its bottom, inconsistencies across different sectors remain.

“While primary sectors like agriculture, mining, and hydrocarbons are showing growth, those dependent on domestic consumption and the population’s real income are not performing as well,” said Massot.

Economists predict a slow recovery for Argentina, as the government focuses on controlling monetary expansion and maintaining a restrictive fiscal policy to combat an inflation rate exceeding 260% annually, which, despite a recent slowdown, remains the highest globally.

Argentina’s statistics agency INDEC is set to release its economic activity estimate for June on Wednesday.