Argentina has come out of recession by winning the libertarian president Milei

London
CNN
—

Argentina has emerged from a deep recession in a major victory for the country’s unorthodox president, Javier Milei, who has spent the past year pursuing deep and painful reforms in Latin America’s third-largest economy.

Gross domestic product grew 3.9 percent in the July-September quarter compared with the previous three months, Argentina’s statistics agency said Monday. Expansion was driven by the agricultural and mining sectors, and consumer spending also increased significantly. But manufacturing and construction suffered major declines in production.

News of the economic rebound comes a year after Milei was elected on a ticket to tackle chronic hyperinflation and revamp the long-suffering economy. It has reduced government spending, reducing rampant inflation and helping to fix the country’s finances. But these measures have also increased unemployment and poverty rates.

The economist has won praise from US President-elect Donald Trump, whose government efficiency measures, Elon Musk and Vivek Ramaswamythey appear eager to replicate his budget cuts in the United States.

Argentina’s Merval stock index, which tracks the country’s two dozen most valuable companies, rose more than 7% on Monday. So far this year, the index has risen 174% as investors welcomed Milei’s radical reforms.

Milei inherited an economy in crisis, driven by hyperinflation that reached 211% last December. by printing money from previous governments to finance spending. According to the International Monetary Fund, the country’s biggest creditor, it has given “better results than expected”.

The IMF, which approved a bailout for Argentina in 2018, the fund’s largest ever, sees the economy shrinking by 3.5% this year, after a contraction of 1.6% last year. The projected 5% growth next year will, in simple terms, more or less reverse these declines.

Economists say Milei’s government needs to lift capital controls, which restrict the flow of foreign currency in and out of the country, and free the exchange rate, still pegged to the dollar, if it wants to attract significant investment to Argentina.

More business investment is key to providing a sustained boost to economic growth and improving living standards, and will ultimately be needed to ensure continued public support for Milei and her party to win a larger majority in midterm elections late next year.