Wall Street Maintains Continuity Expectations for Milei Despite Economic Weakness

The Argentine economy is going through a stage of mixed results, with a gross domestic product contraction of 0.6% in the second quarter and an unemployment rate of 7.9%. At the same time, the Government maintains its fiscal surplus and registered a favorable trade balance of US$ 2,187 million in July.

Projections indicate that the third quarter could also show a decline, although without a currency crisis or an inflationary spike like those observed in other recessionary periods. Labor informality increased over the past year, from 43% to 45%, while the loss of more than 130,000 formal jobs was partially offset by growth in self-employment.

The recovery shows marked sectoral heterogeneity. Energy and agriculture lead the advance and generate foreign currency, with an accumulated energy surplus of US$ 11,000 million over the past twelve months. Mining is also growing and exporting, although from a smaller base, while industry, construction, and retail continue in decline.

For 2026, expansion below 2% is expected, falling short of the official target and initial market forecasts. For 2027, the Budget contemplates growth of 4%, although private estimates are closer to an increase of between 2% and 2.5%. In both cases, performance would be concentrated in a few sectors and would have limited impact on consumption in major urban centers.

The electoral scenario will depend, to a large extent, on the continuity of disinflation and currency stability. Polls cited place Javier Milei's approval at around 35%, with his potential competitors, Axel Kicillof and Sergio Massa, not reaching higher levels. At the same time, country risk reached 526 basis points, reflecting greater caution from investors and making external financing of 2027 maturities more difficult.

Citibank projected GDP expansion of 3.2% for 2027, with average monthly inflation of 1.9% and wage growth of 2.4% monthly. Under that scenario, wages would be 14% above the level recorded in October 2023 by October of that year. The bank also estimated that Argentina could regain access to international markets at the earliest in 2028.