Kalos warned that Q2 contraction exposes structural problem

Argentina's economy registered a contraction during the second quarter of 2026, accompanied by a decline in consumption and private investment. For Martín Kalos, founding partner and director of Epyca Consultores, the downturn was not due to circumstantial factors, but to the wear and tear of the stabilization scheme implemented by Javier Milei's Government.

The economist noted that this scheme was sustained through currency appreciation, containment of real wages, and public spending adjustments. According to his analysis, the weakness of domestic demand constitutes a central feature of the model and disproportionately affects labor-intensive activities.

Kalos also highlighted a gap between the performance of extractive sectors and the rest of the economy. In his view, the growth of activities with few local productive linkages is insufficient to generate broad and sustained expansion.

The improvement in consumer confidence in September was interpreted as a consequence of the recent deceleration in inflation, although it has not yet translated into a consolidated recovery. For mass consumption to rebound, he considered it necessary for wages and formal employment to recover purchasing power, something he does not foresee in the near term.

The analysis also distinguished between the perception of financial markets and the situation of the real economy. While Wall Street values fiscal discipline and the financial surplus for their impact on debt servicing capacity, Kalos described a scenario of stagnant consumption, industrial decline, paralyzed construction, and labor difficulties.

Regarding credit, he argued that it can contribute to activity, but cannot by itself reverse the current situation. He cited low banking penetration, an increase in bank reserve requirements from 20% to 45%, and deterioration in the loan portfolio to individuals and small and medium-sized enterprises as obstacles to significant expansion.