Persistent financial deficits and hyperinflation have long been considered "ulcers" that negatively impact the health of the Argentine economy. The Argentine Government has experienced nine debt defaults, the most recent of which occurred in 2020. Argentina has also continuously had a budget deficit since 2009, with a deficit of up to 4.4% of GDP in 2023.
In an effort to cure these "chronic diseases", the Argentine Government has implemented many drastic economic reform measures over the past several months.
Analysts say that thanks to those "shocking" therapies, Argentina's economy has made positive initial changes. For the first time in the past six months, the inflation rate in this South American country dropped below 10%.
Accordingly, the monthly inflation rate in April 2024 decreased to 8.8%, down from 11% in March 2024 and much lower than the record figure of more than 25% in December 2023.
President Javier Milei affirmed that preventing hyperinflation is the most obvious result of the government's macroeconomic management policy in recent times.
In addition, in the first quarter of 2024, Argentina achieved a budget surplus for the first time in 16 years. With this positive signal, the Central Bank of Argentina has just decided to reduce the basic interest rate from 50% to 40%, marking the 6th consecutive interest rate reduction this year.
With the abovementioned positive changes, the International Monetary Fund (IMF) recently announced that it would consider disbursing 800 million USD to Argentina to support the country's economic recovery.
The IMF assesses that the reform measures implemented by Buenos Aires have exceeded expectations, helping the country achieve a financial surplus for three consecutive months, rapidly decreasing inflation, while increasing foreign exchange reserves and decreasing risks to the economy.
The IMF expects that the South American national economy will regain growth momentum in the second half of this year.
However, experts say that Argentine economy’s current serious crisis cannot be overcome overnight. The Organisation for Economic Cooperation and Development (OECD) estimates that Argentina's GDP in 2024 will decrease by 3.3%, which is more than the forecast of a decrease of 2.3% made in February.
OECD said that high inflation, bold macroeconomic policies proposed by President Javier Milei and political instability will be factors affecting economic activity in 2024, especially the private consumption and investment sectors.
Experts say that Argentina's economy cannot overcome the current serious crisis overnight.
In addition, the implementation of austerity economic policies also entails many consequences not only for the economy, but also for Argentine society.
Since taking office in December 2023, President Javier Milei has thoroughly applied the "austerity" policy, thereby devaluing the local currency by 50%, cutting hundreds of thousands of public sector employees, as well as increasing fees for using public transportation, gasoline, electricity, water and many other essential services.
The Argentine General Confederation of Labour believes that current policies seriously affect people with low incomes, wage earners, retirees, and pension recipients.
People's purchasing power is also severely affected, threatening a negative impact on the economy. Retail sales in the first quarter of 2024 fell nearly 20% compared to the same period last year.
In the context that the government has been forced to take "shocking" measures to overcome economic difficulties, the Argentine leader called on all people to unite together for the common good of the country.
However, protests against harsh economic policies have been taking place continuously across the country in recent times, putting a lot of pressure on the Argentine Government, and leading to social unrest.
Experts say that in the coming time, to realise the goals of curbing inflation, strengthening foreign exchange reserves, recovering the economy and keeping the reform program on track, the Argentine Government will continue to continue to face many challenges, and may even have to accept difficulties.
Balancing the two goals of economic reform and ensuring social stability will continue to be a difficult problem for Buenos Aires.
