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.

Argentina's austerity-wracked economy contracted by 5.1 percent in the first quarter, the INDEC national statistics bureau said Monday, driven by a slowdown in the construction and manufacturing industries. Unemployment also surged in the first three months of 2024, with joblessness now at 7.7 percent.

President Javier Milei, who took office in December, stopped all new public works projects as part of his drive to slash spending. The construction sector was down 19 percent year-on-year, data showed. The manufacturing industry contracted by 13.7 percent and the only sector growing was exports – up 26.1 percent year-on-year and 11 percent higher than in the preceding quarter.

Milei, a self-declared "anarcho-capitalist," vowed to take a chainsaw to decades of overspending and rein in runaway inflation. Consumer prices have slowed, reaching 4.2 percent in May, the lowest monthly rate in two-and-a-half years, but hikes in the first five months of the year totalled 71.9 percent. Annual inflation is running at almost 280 percent year-on-year.

Analysts warned that the gains were a result of a massive economic slump as shoppers tighten purse strings and the poor and working classes struggle to make ends meet.

INDEC said that GDP overall fell 2.6 percent in the first full quarter from the last quarter of 2023. Most categories showed losses, though agriculture, livestock, hunting and forestry recorded year-on-year growth of 10.2 percent as they bounced back from the impact of last year’s drought.

Financial intermediation services declined by 13 percent year-on-year in the first quarter. Wholesale, retail and repairs slumped 8.7 percent.

When he took office, Milei cut Cabinet ministries in half, stopped funding to provincial governments, slashed tens of thousands of public jobs, ripped away fuel and transport subsidies, and sharply devalued the peso. Workers have suffered huge wage drops in real terms. Milei, who is visiting the Czech Republic, on Monday hailed "the largest fiscal adjustment not only in Argentine history but also in humanity."

He said the situation facing his government had been “titanic” and claimed his administration is returning “15 points of GDP to the private sector.”

Unemployment surge

INDEC revealed that 7.7 percent of the working population was unemployed, up 0.8 percentage points compared to the same period last year and a rise of two points from the last quarter of 2023. According to the institute's report, there are 400,000 fewer workers employed in the 31 urban areas it surveys.

Extrapolating from the 31 urban centre measurement, an estimated 1.7 million people are currently unemployed, which would mean some 525,000 new jobless in three months. Experts estimate that 40 percent of workers in Argentina are informally employed.

According to the bureau, the total number of employed persons represented 44.3 percent of the economically active population (14.2 million people) – i.e. 13.1 million citizens are employed, while the unemployment rate of 7.7 percent is equivalent to 1.1 million people who are unemployed but actively looking for work.

Within the employed population (that 44.3 percent), 74 percent are salary workers, while 21.9 percent are self-employed. Looking at specific sectors for the population aged 14 and over, considered to be of working age, the unemployment rate was 8.4 percent for women and seven percent for men.

Notably, 7.6 percent of all employed persons work from home.

The International Monetary Fund expects Argentina's economy to contract by 2.8 percent this year, after a 1.6-percent decline in 2023. In its latest report, the World Bank projected that Argentina’s economy would contract 3.5 percent this year.

More than half the population lives in poverty, according to data from an observatory at the Universidad Católica de Argentina (UCA).

SHOOT THE ANCAPS.