By Hernan Nessi and Aida Pelaez-Fernandez
BUENOS AIRES (Reuters) – Argentina entered a technical recession in the first quarter of the year, official data showed on Monday, with job losses mounting due to libertarian President Javier Milei’s harsh spending cuts, which is prioritizing the restoration of fiscal order.
The South American country’s gross domestic product (GDP) shrank 2.6% in the first quarter of the year compared to the last quarter of 2023, the second consecutive quarterly contraction, the usual definition of a recession.
The quarter marks the first full term under Milei, who took office in December after winning a shock election last year, when he often campaigned with a chainsaw in a blunt illustration of his plans to cut spending and create a zero budget deficit reach.
Official statistics agency INDEC also released jobs data, showing the unemployment rate rose to 7.7% in the first quarter, up from 5.7% at the end of last year. This meant that there were approximately 300,000 new unemployed since the previous quarter.
Triple-digit inflation and recession have hit consumers hard and hurt sales of products like beef, while Milei’s budget cuts have halted state infrastructure projects and led to major job losses in sectors like construction.
Milei, an economist and former expert, has argued that the country needs to get its finances in order after years of budget deficits that have led to regular defaults on government debt and damaged the country’s reputation among global investors.
Since taking office, he has stimulated the markets with his fierce focus on a budget surplus, which he has managed to achieve so far. Bonds and stocks have soared, but the economy has taken a hit, increasing poverty and homelessness.
He states that a strict fiscal policy is necessary and that the economy will turn around.
The INDEC data showed the economy fell 5.1% on an annual basis in the first quarter, slightly better than analyst expectations of a 5.25% contraction.
Private consumption fell 6.7% year-on-year in the quarter, while public consumption fell 5%, data showed. Imports also fell by 20.1%, but exports increased by 26.1%.
(Reporting by Aida Pelaez-Fernandez and Hernan Nessi; Editing by Kylie Madry and Cynthia Osterman)
