Argentina's Economic Crossroads: Milei's Gamble Begins to Show Results

Illustration by Will Allen/Europinion

Argentina’s President, Javier Milei, was elected in December 2023 amid a period of severe economic turbulence, with many seeing him as the last hope for rescuing the country from chronic economic crisis. At the time of his election, Argentina had been facing economic problems for thirty-five years, with annual inflation reaching 160.9% in the month before Milei took office, while GDP shrank by 1.6% in that year. 

The outlook was bleak, and Milei vowed to change this.

Argentina’s 59th President has since embarked on a campaign of rapid and radical economic reform. Milei immediately enacted measures such as devaluing the Argentinian peso by 50% and slashing the number of government ministries by half. This was followed by further reforms in June 2024, widely seen as pivotal in giving Milei the latitude to reboot an economy in crisis.

The latest positive sign came in April this year, when the International Monetary Fund (IMF) announced that it had finalised a loan agreement of around $20 billion with Argentina, with $12 billion disbursed immediately, and a further $8 billion to follow over the next two years. 

So, what can we expect from Argentina’s economy going forward?

If the IMF’s decision is any guide, the answer seems to be recovery.

To put it bluntly, Argentina’s economic past makes it a hazardous investment for bondholders. On several occasions, the country has found itself in hot water when it comes to repaying its loans. In 2018, the country received the “biggest rescue in the IMF’s history” when it secured a $50 billion bailout. However, as soon as 2020, Argentina was in trouble again, narrowly avoiding default through a panicked restructuring of its debt when set to miss $500 million of interest payments. Then, in 2022, the country once again had to turn to the IMF for another $44 billion loan.

As of May 2025, Argentina remains the largest individual debtor to the IMF, to the tune of $40.2 billion, dwarfing the next highest borrower, Ukraine, by some $30 billion. 

Given both Argentina’s history with debt and its already substantial IMF borrowings, one would posit that the IMF must genuinely believe in Milei’s economic turnaround to be dispensing the country another $20 billion. 

Thus, the loan granted in April can be viewed as a vote of confidence in Milei’s policies, with the IMF declaring that they believe that the loan will support “a path toward entrenching macroeconomic stability, strengthening external sustainability, and laying the foundation for stronger and more resilient growth”. 

At a macro level, the IMF’s optimism appears warranted.

Early indicators suggest that Milei’s aggressive reforms are beginning to bear fruit. Inflation, while still painfully high, has shown signs of slowing. Official figures for March reported a year-on-year inflation rate of 55.9%, a far cry from its peak of 292.2% in April 2024. This steep decline suggests that a combination of tighter monetary policy, fiscal austerity, and structural reforms is starting to break the vicious inflationary cycle that has plagued Argentina for years.

Adding to this, Argentina’s growth outlook is equally encouraging. The World Bank has projected that Argentina’s economy will grow by 5.5% this year, adjusted upwards from the 5% projection that it made in January. If realised, this would mark 2025 as the country’s first year of positive GDP growth since 2022, ending a painful period of contraction and stagnation. Supporting this, industrial production has also begun to rebound, recording three consecutive months of output growth to start the year, following eighteen unbroken months of decline. As a “key barometer of the country’s economic health”, this rebound signals that business activity is reviving, and confidence is gradually returning to the private sector.

Thus, it would appear that Milei’s policies are beginning to stabilise an economy long beset by volatility and decline.

However, this broader economic positivity has come at a steep social and political cost, as ordinary Argentines battle the short-term harshness brought on by Milei’s changes. For example, Argentina’s Consumer Price Index (CPI) score, a measure of the prices paid by average consumers, has skyrocketed to 8,350 points, almost triple what it was when Milei first took office. Expectedly, this has had substantial impacts on communities, with poverty rates currently sitting at 38.1% of the population, although at the peak of Milei’s turnaround, over 50% of the population found itself recognised as below the poverty line. This combination of high prices for consumers and astronomical poverty rates is unsustainable, posing an acute challenge to Milei in the months ahead.

Unsurprisingly, the scars left by the initial shock are deep, demonstrated by widespread strikes, protests, and general discontent amongst the Argentinian population. Most recently, in April this year, Argentina’s largest workers' unions conducted a 24-hour general strike in response to Milei’s public spending cuts, marking the third general strike since he took office. Protests against the government have regularly convulsed the country too, with thousands of protesters descending on the streets of Buenos Aires as recently as June last year, which ultimately saw violence, with several protesters being arrested. As frustration simmers, the growing unrest amongst the population underscores the fragile balance Milei must maintain between driving economic reform and preserving social stability.

Overall, the broader economic outlook for Milei’s Argentina is favourable, with some of the most critical economic indicators showing real signs of recovery. The recent loan from the IMF should aid this, providing vital breathing room for the government to continue its path of stabilisation. However, Milei must proceed with caution. The shock therapy introduced upon his election continues to reverberate through Argentinian society and, without controlling these pressures in the short term, the 59th President runs a serious risk of mounting unrest, capable of derailing both his reform agenda and Argentina’s fragile recovery.