Argentina’s economy looks set to slip into a technical recession after a weak recovery in August failed to repair the damage of a steep July contraction — a setback for President Javier Milei’s government as it heads towards an election year with its economic programme under fresh scrutiny.
As Bloomberg reported, the lukewarm August figures leave activity well short of what would be needed to avoid two consecutive quarters of contraction, the standard definition of a technical recession. Gross domestic product already shrank 0.6% in the second quarter.
A July plunge that set the trap
The hole was dug in July, when the national statistics agency INDEC’s monthly activity indicator (EMAE) fell 2.9% from the previous month on a seasonally adjusted basis — the steepest monthly drop since the pandemic lockdown month of April 2020 — and was down 1.4% on a year earlier. Eight of fifteen sectors contracted year on year, with trade down about 5.1% and manufacturing down 4.6%; between them, the two sectors subtracted roughly 1.3 percentage points from overall activity.
Private economists calculated that activity would need to rebound by around 6% across August and September combined to keep the third quarter positive — a feat August’s tepid print, in which construction managed growth of only about 0.4%, has made highly improbable.
Forecasters are marking Argentina down
JPMorgan responded to the July data by cutting its 2026 growth forecast for Argentina to 1.5%, from 2.7% previously, and projecting an annualised contraction of roughly 4% for the third quarter. The World Bank followed on 6 October, trimming its 2026 forecast to 2.1% while noting that many of the investment projects underpinning official optimism have yet to materialise. The central bank’s own survey of analysts now centres on a third-quarter contraction of about 1%.
The pattern underneath the headline numbers is a two-speed economy. Export-facing sectors — energy, mining and agriculture — continue to expand, helped by record output from the Vaca Muerta shale formation. But the domestic economy is struggling: household consumption is weak, credit conditions are tight, delinquency on personal loans is rising, and industrial and construction employment remains under pressure. It is a divergence we have seen in other economies in our coverage, where headline trade or market strength coexists with squeezed households.
The politics of a technicality
The Milei government disputes the recession framing, questioning seasonally adjusted statistics and arguing that structural change makes some traditional indicators unreliable. Ministers prefer to emphasise the programme’s genuine achievements: inflation has fallen to its lowest monthly readings of the year, reserves have reached record levels and the fiscal accounts remain in surplus.
Markets, so far, have been relatively forgiving — country risk has held around 500 basis points despite the weak data. But a confirmed technical recession would be Argentina’s ninth in just over three decades, and it lands at an awkward moment: the government needs growth, jobs and real incomes to be visibly recovering before next year’s elections, not contracting on a technicality.
September’s data, due in the coming weeks, will settle the argument either way. On the evidence of August, few forecasters are betting on a rescue. For more on the region’s place in global markets, see our coverage of Wall Street’s earnings season and energy shipping through Hormuz.