The Milei plan is making steady progress, and its impact is increasingly evident. Initially, the financial economy and its indicators showed improvement. Now, the real economy is awakening. This past week has been filled with macroeconomic data about Argentina, revealing notable enhancements. In simple terms: GDP is growing significantly, surpassing all expectations; the unemployment rate has declined for two consecutive quarters; and real wages (adjusted for inflation) continue to rise. Meanwhile, the country risk (the spread between the 10-year US Treasury bond and Argentina’s equivalent) has eased to around 750 basis points after nearing 800 during the week.
Despite some investor concerns regarding the International Monetary Fund’s (IMF) delay in finalizing a major agreement to refinance Argentina’s debt in dollars at a more sustainable interest rate, the Milei plan continues to drive significant economic changes in South America. A series of improving indicators reflect this transformation.
A Chain Reaction of Economic Growth
All these indicators are interconnected. Improved financial conditions have boosted investments in Argentina, enhanced confidence, and reduced financing costs. This, in turn, has stimulated economic activity, leading to job creation and wage increases. The key element of the Milei plan is its aggressive disinflation strategy, which has brought the monthly Consumer Price Index (CPI) down from 25% in December 2023 to just 2.4% in the latest report. The transition from financial recovery to real economic improvement is now well underway.
Unemployment Declines and Employment Increases
The latest labor market data confirms the ongoing recovery. Argentina’s unemployment rate fell to 6.4% in the fourth quarter of 2024, down from 6.9% in the previous quarter and 7.7% in the first quarter, when the shock therapy and budget cuts initially led to a sharp rise in joblessness. According to the National Institute of Statistics and Censuses (INDEC), the activity rate, which measures the economically active population as a percentage of the total population, reached 48.8% between October and December. Meanwhile, the employment rate, representing the proportion of employed individuals relative to the total population, increased to 45.7% during the same period.
Real Wages on the Rise
The improving job market has been accompanied by a continuous rise in real wages. The logic is simple: employment is growing rapidly, labor shortages are emerging, and employers are offering higher wages. In a disinflationary environment, these increases translate into real wage growth, boosting purchasing power. Consequently, consumer spending is on the rise, as Argentinians can afford more goods and services with their increasing incomes.
According to economist and professor Juan Ramón Rallo, real wages in Argentina in December 2024 were already 3.3% higher than in November 2023, before Milei took office. The aggregate wage mass also grew by 1.4% in real terms. This wage recovery is fueling economic activity, supporting both consumption and investment.
Argentina’s GDP Surges
Argentina’s economy experienced a robust expansion in the fourth quarter of 2024. According to recent INDEC data, quarter-over-quarter growth reached 1.4%, while year-over-year growth stood at 2.1%. On an annualized basis (assuming this growth rate continues for four quarters), GDP soared by 5.7%, exceeding market expectations, which ranged from 4.7% to 5.5%. These strong figures extend the recovery that began in the third quarter.
Although economic activity contracted in early 2024, the downturn was not as severe as initially expected given the austerity and deregulation measures. Meanwhile, the subsequent recovery has been stronger than anticipated. The annual GDP decline in 2024 was just 1.7%, far less than the 3% recession forecasted months ago. Key components such as consumption and investment have now returned to pre-Milei levels, demonstrating a faster-than-expected rebound despite the stringent fiscal adjustments.
Economist Juan Ramón Rallo described the GDP data as highly positive: “The economy grew 1.4% quarter-over-quarter (equivalent to a 5.7% annualized rate). Argentina’s GDP in Q4 2024 was 2.1% higher than in Q4 2023. In other words, Argentina is already generating more wealth than before Milei.” Given the deep economic contraction in the first two quarters of 2024, ending the year with a 2.1% annual growth rate highlights the strength of the recovery. Notably, Argentina’s quarter-over-quarter GDP growth of 1.4% is nearly double that of Spain (0.8%), the eurozone’s fastest-growing economy.
Rising Consumption and Investment
On the demand side, both consumption and investment have shown remarkable improvement after a challenging period. Gross fixed capital formation suffered a significant decline in late 2023, dropping more than 10% before Milei took office and continuing to plummet in early 2024. However, in Q4 2024, fixed capital investment surged by an impressive 11% compared to the previous quarter, continuing the double-digit growth trend from the previous quarter.
Private consumption has also made a full recovery. Economist Daniel Fernández from Francisco Marroquín University noted that the primary criticism of Milei’s early government period was the decline in consumer spending. However, this contraction had been ongoing throughout 2023. The media largely ignored this until it became politically relevant. In the last two quarters of 2024, private consumption rebounded by over 7% in real terms, bringing it above the levels recorded a year earlier.
A Success Story in the Making
What initially appeared to be a financial recovery is gradually transforming into a full-fledged economic success story. The resurgence of economic activity, the labor market, real wages, and private consumption all point to a thriving economy. The latest GDP figures confirm that private consumption has surpassed pre-2024 levels, while the sharp increase in imports suggests that Argentinians are actively purchasing goods and services from around the world.
With these strong indicators, the Milei plan is proving to be an economic game-changer, demonstrating that fiscal discipline, deregulation, and disinflation can pave the way for sustainable growth and prosperity in Argentina.