Milei’s Austerity Plan Pushes Argentina Into Recession

[MilHojas]

Milei’s Austerity Plan Pushes Argentina Into Recession in First Quarter

(Bloomberg) -- Argentina entered a recession in the first quarter of the year as President Javier Milei’s brutal spending cuts sent consumption and activity plummeting.Most Read from BloombergBuzzFeed Struggles to Sell Owner of Hit YouTube Show ‘Hot Ones’Jain Global Raises $5.3 Billion, Secures...

finance.yahoo.com

INDEC reports 5.1% Q1 slump in GDP, unemployment on rise

Argentina's economy contracted by 5.1% in first quarter, says INDEC; Unemployment hit 7.7% as Milei government’s austerity measures began to kick in.

www.batimes.com.ar

 

[Quilombo]

What could go wrong? Recession, continued high inflation (estimates for June are ~5.5%), an artificially cheap dollar (hurts exports), and 57% poverty rate, yet this idiot is talking about how he thinks he'll probably get a Nobel Prize in Economics.

Is Narcissus going to drown while staring at his own reflection, despite all the alarm bells going off, and take Argentina with him? Yet to be seen, but 6 months in and things aren't looking good unless you're the owner of an HMO.

 

[rob0001]

I'm pretty sure Argentina entered a recession September 2023...

 

[Ries]

I find it interesting that Milei says the way to cut inflation is to remove all tariffs on imports, and Trump says the way to cut inflation is to institute universal tariffs on all imports.

 

[FrankPintor]

I'm pretty sure Argentina entered a recession September 2023...

Nope, remember a recession is 2 quarters of contraction:

Argentina economic activity fell again in February as manufacturing, retail slump - Buenos Aires Herald

Official statistics also show Argentina’s GDP shrank in Q4 of 2023, indicating the country has likely entered a recession

buenosairesherald.com

"The figures indicate that the country’s economy likely sank into recession, contracting in the final quarter of 2023 and the first quarter of 2024". And I think the contraction was much larger in 2024:

"
Activity in the construction sector plummeted by almost a fifth (-19%) compared with February 2023. It was followed by financial services (-12.1%), manufacturing (-8.4%) and retail sales (-5.5%).

This was partially counterbalanced by mining (up 12%) and agriculture, which picked up by 5.5% as the country’s parched fields started to recover from 2023’s punishing drought"

 

[Murray Rothbard]

A recession is generally the result of actions taken up to 24 months ago. Well before Milei was in power.

 

[Ruta Otto]

A recession is generally the result of actions taken up to 24 months ago. Well before Milei was in power.

In a normal country this would be the case.

 

[FrankPintor]

A recession is generally the result of actions taken up to 24 months ago. Well before Milei was in power.

Right. Let's look at it from this point of view: "In 1974, economist Julius Shiskin came up with a few rules of thumb to define a recession: The most popular was two consecutive quarters of declining GDP. A healthy economy expands over time, so two quarters in a row of contracting output suggests there are serious underlying problems, according to Shiskin. This definition of a recession became a common standard over the years".

From https://www.forbes.com/advisor/investing/what-is-a-recession/

And it seems sensible since otherwise we're galloping past "ah pero Alberto" territory and encroaching on "ah pero Macri".

 

[Murray Rothbard]

The laws of economics don't stop applying in Argentina, they are universal. There is no "normal" country and abnormal country economics.

Recessions are the product of previous misdirected investments by the private sector. When these mistakes are realised businesses have to fire workers and therefore GDP shrinks. These mistakes occurred in part because of previous policy decisions by previous governments. Putting all the blame on one guy just indicates biased analysis.

 

[ArgentinaVet]

The laws of economics don't stop applying in Argentina, they are universal. There is no "normal" country and abnormal country economics.

Recessions are the product of previous misdirected investments by the private sector. When these mistakes are realised businesses have to fire workers and therefore GDP shrinks. These mistakes occurred in part because of previous policy decisions by previous governments. Putting all the blame on one guy just indicates biased analysis.

Unfortunately economics is not a hard science and implementing economic policies that have worked in most/many places is often politically very difficult/ unfeasible.

Argentina and Japan are infamous for having defied "the laws of economics" with outcomes that are the exact opposite of each other in the post WW2 era.

In the case of Argentina, the deeply entrenched dysfunction is mostly the result of politically caused distortions that have compounded over many decades. Milei is not the cause of any of these distortions/dysfunctions; he is trying to unravel decades of politically caused distortions and reorganize an economy that has NEVER in the history of Argentina been organized in a way that is sustainable over time.