Argentina’s improving economic data continues to surprise, with its growth forecast revised upward to 5.7% for 2025, while the global trend is moving in the opposite direction. The Argentine economic stabilization program has focused on a tough fiscal adjustment, which penalizes specific sectors such as retirees and industry, and a currency control policy that generates distrust among foreign investors. Several analysts question whether these positive figures can be sustained in the long run.
Argentina appears determined to leave its recession behind, as confirmed by the latest economic outlook report from the Organization for Economic Cooperation and Development (OECD), which raised its growth forecast to 5.7%. Meanwhile, the global trend saw a downward revision due to geopolitical uncertainty and trade tensions.
The shift in Argentina’s forecast is significant: for 2024, the figure was -1.8 %, and if the 5.7% growth for 2025 is confirmed, it would be the second strongest among G20 nations, behind only India, which expects a 6.4% expansion.
Additionally, the country has been experiencing a reduction in inflation. In 2024, inflation reached 118% annually, a decrease of 44% from the previous year. For 2025, OECD projections suggest inflation could settle around 28%. This is a direct result of the Argentine economic stabilization program, which has prioritized strict fiscal policies to curb inflationary pressures.
A Rapid Stabilization Plan
President Javier Milei appears to be achieving the monumental goal of reducing Argentina’s inflation through a strict fiscal adjustment combined with a quasi-fixed exchange rate policy, as explained by economist Gerardo Della Paolera, Executive Director of the Bunge and Born Foundation.
“President Milei has done a very rapid adjustment—one of the fastest known stabilization plans—and it has been successful. Consumption levels have recovered, and inflation has decreased by 25%. We have a monthly inflation rate of around 2%,” Della Paolera explains, though he notes that many questions remain regarding the Central Bank and monetary reform.
Progress has been made, but reducing inflation alone is insufficient for an effective economic recovery plan. Milei himself warned of this in his inaugural speech as president:
“There is no money. We know that in the short term, the situation will worsen, but later, we will see the fruits of our efforts.”
From the beginning of his administration, he made it clear that he would implement budget cuts—symbolized by his chainsaw in hand.
The fiscal adjustment plan has included devaluing the Argentine peso, budget cuts in nearly all sectors, layoffs of public employees, suspension of public works projects, and reductions in subsidies. These policies are central to the Argentine economic stabilization program, which aims to achieve long-term financial discipline. However, this raises the question of whether the program is truly effective.
Economist Della Paolera argues that it produces results, though with some caveats. “Moving toward fiscal balance has worked. What remains to be seen is how the state reform will be implemented, as public investment needs to recover,” he said, emphasizing Argentina’s infrastructure needs. “It is more expensive to transport exportable products from northern Argentina to other Argentine ports than to the Liverpool market. The country severely lacks infrastructure, which is also essential for economic growth,” he added.
“Not All Sectors Suffer Equally”
Della Paolera also highlighted the need for pension and social security reform, as Argentina’s retirees have borne the brunt of Milei’s fiscal adjustment. According to data from the Argentine Institute of Fiscal Analysis, pension spending accounted for 19% of total budget cuts. This has led retirees to protest every Wednesday since mid-2024, as they have lost purchasing power and have faced changes to the rules governing access to free medication.
According to Della Paolera, several sectors have been affected, but not all to the same extent. “President Milei has been very skillful in increasing what is known as the universal child allowance, which benefits the most disadvantaged sectors. He raised it by 300%, alleviating the situation for those in greatest need. However, the industrial and private sectors operate on very thin profit margins and are under immense pressure. Because with the current exchange rate regime, where the dollar is appreciating much slower than inflation in pesos, businesses are somewhat strangled by this real exchange rate lag,” he analyzed.
For Della Paolera, it is crucial to stimulate investment, which has stagnated due to investor uncertainty regarding the future of exchange rate regulations, which remain unclear. This is one of the significant unresolved aspects of the Argentine economic stabilization program, as investors require greater clarity on currency policies before committing to large-scale projects.
Currency Controls: Key to Reducing Inflation, but Not to Economic Growth
In Argentina, the term “cepo cambiario” colloquially refers to restrictions on the purchase of U.S. dollars. Milei’s administration implemented these restrictions. For analysts like Della Paolera, this temporary fix helps control inflation but does not necessarily drive growth.
With these restrictions, the Central Bank has been unable to rebuild its reserves. This exchange rate policy, which adjusts at a rate below inflation, ensures a steady decline in inflation every month. However, the key question is whether this is sustainable. “Generally, you remove exchange controls in favorable economic conditions when there is confidence. If we enter turbulent times, lifting the restrictions will become increasingly difficult,” Della Paolera said. He noted that once these controls are lifted, their impact on different sectors and the sustainability of economic growth will become evident.
Economist Carlos Quenan, Vice President of the Institute of the Americas in France, shares this view. “In principle, a libertarian government like Milei’s should not rely on such controls, as they are a form of government intervention,” Quenan noted, referring to tensions between exporters and importers.
“Exporters, despite having a special regime that allows them to settle part of their sales at a parallel exchange rate, would prefer full exchange rate liberalization. On the other hand, importers face tensions because the government is also pursuing trade liberalization alongside an overvalued exchange rate that favors imports. This creates the worst possible scenario: trade liberalization coupled with an overvalued peso that benefits imports but puts domestic producers at a disadvantage,” he added.
Both economists acknowledge the progress of Milei’s fiscal adjustment plan, but they are unsure whether such stringent austerity measures are sustainable in the long run. While the Argentine economic stabilization program has successfully lowered inflation, the long-term outlook depends on balancing fiscal responsibility and investment-friendly policies.
How Long Will Social Tolerance Last?
Quenan acknowledges that some sectors of the economy have been severely impacted but also highlights the remarkable level of social tolerance for Milei’s Argentine economic stabilization program. “The government firmly believes that controlling inflation is a highly valued goal. And while social costs vary across different sectors, inflation control will likely secure strong electoral results in the midterm elections this October,” he explained.
There is a sense of anticipation in Argentina. Economic growth is expected this year, and inflation will likely continue declining. However, as analysts point out, many questions remain unanswered. Issues such as the independence of the Central Bank, the exchange rate system, investment regulations across various sectors, the savings system, and the trust required to attract foreign investment all require further clarification. Most importantly, the future of the Argentine economic stabilization program remains uncertain, as many argue it cannot last indefinitely.
The Argentine president appears to be succeeding in the first phase of his stabilization plan. Still, the true test lies ahead—developing a long-term economic strategy that ensures sustained improvement for all sectors of the country.