Argentina Economy Posted Mild Contraction Amid Runoff Election

(Bloomberg) -- Argentina’s economy posted a slight contraction in November amid a volatile runoff election that handed a victory to President Javier Milei, who warned of a long period of stagflation as he implements shock therapy to narrow the yawning deficit.

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Economic activity in November fell 1.4% from October, according to government data published Tuesday. From the same month a year earlier, activity fell 0.9%, more than the 0.5% decline forecast by economists surveyed by Bloomberg.

Argentines went to the polls Nov. 19 to choose between Milei and former Economy Minister Sergio Massa, whose government imposed a plethora of capital controls and price freezes to cap accelerating inflation, while running the money-printing machine to maintain government salaries and benefits. By the end of 2023, inflation hit 211.4% and is expected to keep accelerating in the coming months before it begins to ease, according to the International Monetary Fund.

Milei ran on a promise of aggressive fiscal austerity and is staying true to his word. His economic plan, helmed by Economy Minister Luis Caputo, has so far seen an aggressive currency devaluation, a freeze on public works, a sharp rollback on energy and transport subsidies as well as public sector job cuts. Worker unions are planning a nationwide strike Wednesday to protest the austerity measures.

Economists surveyed by the central bank forecast that gross domestic product will contract 2.6% this year.

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