Under President Javier Milei, Argentina is experiencing a decline in poverty rates and economic recovery after a recession. Recent reports indicate the poverty rate may drop to 38.9 percent, down from over 54 percent earlier this year. A growth of 3.9 percent in GDP marks a positive turnaround, while social spending has increased, directly benefiting vulnerable populations. Despite challenges, including a significant number of citizens still living in poverty, there is growing optimism about the country’s economic future.
Exciting developments are unfolding for Argentina under President Javier Milei, who has completed a year in office. Recent reports indicate a notable decline in the nation’s poverty rate over the past three months. By year’s end, it’s anticipated that the rate may dip below the level seen when Milei first assumed power.
In terms of economic progress, Argentina is witnessing a recovery. The economy emerged from recession in the third quarter, with the gross domestic product (GDP) posting a seasonally adjusted growth of 3.9 percent from July to September compared to the previous quarter. This marks the first quarter of growth for Argentina since it entered recession late in 2023, according to the national statistics agency.
For Milei, this shift is unexpectedly positive. His radical austerity measures, which transformed the state’s budget deficit into a surplus and significantly curtailed inflation, faced considerable backlash. Critics have pointed fingers at his budget cuts, attributing them to rising poverty levels and a temporary yet severe recession.
Poverty Rate Sees Significant Fluctuation
Earlier this year, the poverty rate surged by 11 percentage points, exceeding 54 percent. However, the National Council for the Coordination of Social Policy (CNPS) now predicts, based on insights from the statistics office Indec, that the poverty rate for the third quarter stands at 38.9 percent. The official figures for poverty will next be released in March.
The CNPS’s forecast is based on extrapolated data concerning unemployment, income distribution, and decreasing inflation trends observed in the third quarter. Remarkably, the rate of extreme poverty has dropped from over 20 percent in the first quarter to 8.6 percent.
In Argentina, the national statistics agency Indec conducts a representative household survey twice a year to determine the poverty rate, comparing household incomes against living costs. Households unable to afford basic necessities such as housing, clothing, transportation, education, and healthcare are categorized as “poor,” while those unable to meet even the minimum caloric intake are classified as “extremely poor.”
Independent studies are now corroborating the improvements in poverty conditions. The Observatory for Social Debt at the Catholic University (UCA) highlights that declining inflation has led to lower food prices. Moreover, the government has ramped up social spending for the most vulnerable groups, particularly children, by eliminating middlemen like cooperatives and political organizations. The CNPS reports a significant shift, with 93.5 percent of social assistance now reaching those in need directly, compared to just 50 percent previously.
Despite these positive signs, Argentina under Milei still faces challenges, with 18 million out of 47 million citizens categorized as poor—a stark contrast to the country’s historical status as home to one of the largest middle classes in Latin America.
Rising Consumption and Investment Trends
To sustain growth, Argentina must maintain the positive momentum gained in the third quarter to navigate out of the depths of recession. Investment bank Morgan Stanley forecasts a 3.6 percent contraction for the entire year of 2024, but predicts a robust recovery with 4.4 percent growth for 2025.
Local financial institutions, such as Cohen in Buenos Aires, express a more optimistic outlook. They project that growth this year will outperform initial expectations, anticipating a decline of only 2.1 percent. However, disparities among various sectors remain pronounced.
The industrial sector has rebounded to levels seen at the end of 2023, while the labor-intensive construction industry is still grappling with a 15 percent decline in activity this year, primarily due to Milei’s suspension of public contracts. According to investment bank BBVA, local consumption and investments were the main drivers of growth in the third quarter.
JP Morgan anticipates that even with a predicted growth rate of 5.2 percent next year, per capita income will only return to its 2021 levels. Nonetheless, a growing number of Argentinians are optimistic about their economic prospects for the upcoming year. Surveys by the Universidad Torcuato Di Tella reveal that while the majority of citizens perceive their current situation as poor—only about a third view it positively—58 percent believe that improvements are on the horizon. Interestingly, sentiment within the provinces and among the poorer segments of the population is markedly more positive than that in the capital and among the middle class.