President Milei’s stabilisation is delivering results: inflation is down, growth has returned and exports are playing a larger role in the recovery. But Argentina’s second test is harder: turning macroeconomic stability into investment, jobs and higher real wages before the political clock runs out.
In an Economics Observatory article published in May 2024, we argued that the first test facing President Javier Milei’s new government was stabilising the economy: closing the fiscal deficit, reducing inflation, avoiding another balance of payments crisis and restoring nominal stability.
Significant progress has been made. Monthly inflation fell from 12.8% in November 2023 to 2.1% in May 2026 (or from an annualised rate of 325% to 28%), the fiscal accounts are in surplus and net reserves improved slightly from negative $8.5 billion in 2023 to negative $6.5 billion in April 2026.
Growth has also returned. That matters because Argentina is trying to escape more than a decade of stagnation. By the fourth quarter of 2023, when Milei took office, the economy was roughly at its level in the fourth quarter of 2011 – over ten years of virtually no accumulated growth and declining per capita income.
Against that backdrop, the recent expansion is important. By the first quarter of 2026, seasonally adjusted activity was 6.5% higher than in the fourth quarter of 2023. The International Monetary Fund (IMF) and the World Bank project growth of around 3.5% for 2026, re-opening the possibility of a more sustained expansion (IMF, 2026; World Bank, 2026).
Yet this has not yet fully translated into Argentina’s labour market. According to INDEC (the country’s national institute of statistics and census), real wages remain stagnant, increasing by only 0.1% from December 2023 to March 2026, and unemployment has increased to 7.8% in the first quarter of 2026 – up from 6.9% in the first quarter of 2023. Argentines now report that lack of employment and low wages are their main concerns, after years in which inflation dominated public debate (ESPOP, Universidad de San Andrés, 2026).
How can these facts be squared? Can stabilisation become the basis for sustained and inclusive growth? These questions are hard to answer, and here we place Argentina’s stabilisation programme in historical perspective to help us to address them.
How does Argentina’s growth since 2024 compare with other stabilisation episodes in Latin America?
To place Argentina’s recovery in context, we compare it with 51 Latin American stabilisation episodes since the 1960s. Following Calvo and Végh (1994) and Palazzo et al (2025), we divide the episodes into 15 programmes that achieved successful disinflation (that is, sustained reductions in inflation over five years), and 36 that either failed to reduce inflation significantly within 18 months or achieved only temporary disinflation that was not sustained through to year five.
For each episode, we track real GDP growth around the programme’s start with the stabilisation year set at ‘year zero’ (t=0) – 2024 for Argentina. The comparison does not imply that Argentina will replicate any historical case, but it establishes a range of outcomes and identifies features that are typical of programmes that eventually succeeded.
Figure 1 shows where Argentina sits. In the stabilisation year, neither successful nor failed programmes delivered strong growth. The median GDP growth rate at year zero was –0.2% for successful programmes and –0.8% for failed ones. Argentina’s –1.3% contraction in 2024 was below both, reflecting the depth of the fiscal adjustment and inherited imbalances.
The recovery path is where successful and failed programmes start to diverge. In successful programmes, median GDP growth after year one was 4.2% and averaged 4% through to year five. In failed programmes, growth was 1.2% and stayed subdued, never reaching the pace of successful ones. By year five (t=5), successful programmes had accumulated gains of 25% since the start of the programme, against 8% for failed episodes.
While it is still too soon to place Argentina in either group, the country’s 2025 growth of 4.4% resembles the performance of historically successful programmes after one year, and it is above the median for failed ones. This is among the most encouraging signals of the recovery.
Figure 1: Real GDP growth around the stabilisation year, by programme outcome
Note: Year-on-year real GDP growth (percent). Lines show the group median. The shaded band covers the interquartile range (25th to 75th percentile) of stabilisation episodes. Argentina’s 2024 stabilisation programme is in red.
Source: Authors’ elaboration based on CEPALSTAT, Palazzo et al (2025) and Calvo and Végh (1994).
What is driving this early growth?
Growth is now underway, but the question of whether it can last depends less on the aggregate growth rate than on its composition. To explore this, we examine the demand components in successful programmes to assess whether Argentina’s favourable growth performance rests on a sustainable mix of spending. Figure 2 shows three things.
First, Argentina’s export surge is exceptional. Goods and services exports grew almost 30% between the year before the programme (t=–1) and one year into the programme (t=1), against a negative median for successful programmes. This places Argentina in the top 25% of export performance after stabilisation.
Net exports have shifted from a persistent drag to one of growth’s main drivers for the first time in over a decade. This reflects the recovery from the 2023 drought and Vaca Muerta’s shale oil and gas, the development of which has permanently altered Argentina's commodity position in a way that no previous stabilisation programme could draw on, making the country a net energy exporter for the first time since 2010.
Second, private and public consumption follow a pattern broadly consistent with successful episodes. Private consumption contracted slightly more than the median for successful programmes at year zero and recovered slightly more strongly at year one. Household demand is there, and the recovery of real wages is consistent with it. After a sharp compression following the December 2023 devaluation, real wages have been slowly recovering, led mainly by the informal sector.
Formal private real wages have also recovered, but not yet to their November 2023 levels – which itself is not a high bar given prior stagnation. Public consumption also fell at year zero, as most stabilisation plans involve a fiscal adjustment, and was broadly flat after a year.
Third, investment collapsed more sharply than most successful programme comparators: approximately −17% between a year before the programme and year zero against a successful median of around 3%, with only a partial recovery at year one. This leaves investment as the central unresolved question of the current programme, and the one to which we turn below.
Figure 2: Evolution of demand components: Argentina 2024 stabilisation compared with successful stabilisation programmes
Note: Shaded bands cover the interquartile range.
Source: Authors’ elaboration based on World Development Indicators, Palazzo et al (2025) and Calvo and Végh (1994).
What about the structure of the economy?
The economic recovery hides a sharper transformation. Figure 3 plots sectoral value added against successful programmes, showing sectors that outperformed other plans and those falling short.
On the outperforming side, mining at year one stands roughly 18% above where it was a year before the programme, against a median for successful programmes of approximately 8%. This reflects the structural transformation driven by Vaca Muerta.
Agriculture also surged, in part recovering from the severe 2023 drought. The gradual reduction of export taxes announced in Decree 423/2026 and the narrowing of the official parallel exchange rate gap, which had long taxed the sector's competitiveness, suggests this trajectory may continue to improve.
The two major laggards are construction and manufacturing. Both sectors usually recover slowly around stabilisation, but in Argentina, they contracted sharply in 2024 and remain behind. Construction fell by around 13% between a year either side of the programme, against a median for successful programmes of around 0%. Manufacturing sits at approximately –8% over the same period, against a successful median close to 0%.
Construction has been hit by two forces. The fiscal adjustment cut public infrastructure investment by approximately 87% in real terms in 2024. At the same time, the real peso appreciation that followed the initial devaluation raised construction costs in dollar terms, while the purchasing power of domestic buyers and renters has not yet recovered sufficiently to compensate.
Manufacturing tells a different but related story. Some sub-sectors (including plastics and rubber) have suffered indirectly through their dependence on construction. Others (such as textiles, leather, footwear, some metals, and motor vehicles) are structurally import-competing sectors: they have struggled as trade normalisation and the removal of foreign exchange controls exposed them to external competition from which they had long been sheltered.
Critically, their struggle is not the result of weak consumer demand since private consumption has recovered. What has changed is where demand goes: with import restrictions removed, households increasingly satisfy it through imported goods rather than domestic production. Consumption goods and vehicle imports grew by 20% and 75% per year in 2024-25 (compared with 1.4% and –6.6% between 2011 and 2023, respectively).
The challenge is distributional. The adjustment cost falls less on consumers than on workers in previously protected sectors. Many of the lagging sectors (textiles, leather, footwear, some metals, and motor vehicles) are labour-intensive, concentrated in the industrial belt of greater Buenos Aires, and were structured around a macroeconomic regime of import restrictions, tariff protection and foreign exchange controls that no longer exist.
Importantly, several were already contracting between 2010 and 2023, under the very regime that was supposed to protect them. The current programme has accelerated contractions already underway, making the costs of transformation immediate and concentrated, while the benefits from expanding sectors will accrue elsewhere and only gradually spill over to the rest of the economy.
Figure 3: The evolution of sectoral value added in selected sectors – Argentina’s 2024 stabilisation compared with successful stabilisation programmes
Note: Real value added by sector indexed to 100 at t = –1, median across successful programmes. Shaded bands cover the interquartile range. Sectors shown for illustrative purposes: agriculture, mining, manufacturing, and construction.
Source: Authors’ elaboration based on CEPALSTAT indicator 2196, Palazzo et al (2025) and Calvo and Végh (1994).
What explains the investment gap?
Investment is the main unresolved piece of Argentina’s recovery. In successful stabilisation episodes, lower inflation and greater macroeconomic predictability have tended to support capital formation. In Argentina, that response has not yet materialised. Investment fell more sharply than in most successful programme comparators and, despite some recovery, remains one of the weakest components of demand.
The gap has several sources. The first is fiscal. Public investment was one of the main margins of adjustment, and the cut in public works directly hit construction and its suppliers.
The second source is structural. Argentina entered the programme with a larger degree of distortions in the economy. Some sectors had operated for years under capital controls, import restrictions, regulated prices and a wide gap between the official and parallel exchange rates.
These distortions shape relative prices and investment decisions across sectors. As trade normalises and the exchange rate gap narrows, some activities must adapt to a different regime. In that context, Argentina’s stabilisation is changing which activities are profitable, and where capital should move next.
The third source of the investment gap is the domestic financial system and access to foreign savings. At first sight, the constraint seems less about the current level of domestic interest rates, and more about their volatility. By April 2026, the prime lending rate had fallen to 25.8%, below expected annual inflation of 30.5% for the year.
But firms do not invest based only on today’s rate. They invest based on the range of rates, exchange rates and policy conditions that they may face over the life of a project.
Last year’s volatility shows why this matters. As the mid-term elections approached, peso demand weakened, portfolio dollarisation increased and markets repriced the probability that the stabilisation regime could face a political shock. The prime lending rate jumped to 81%, while annual inflation was 31.6%.
The same logic pushed ‘country risk’ above 1,100 basis points. Both prices were saying the same thing: investors were demanding compensation for holding Argentine risk. Moreover, the shock also left scars on banks’ balance sheets. Non-performing loans increased, balance sheets weakened and credit has been slow to recover even after rates fell.
For these reasons, the current level of interest rates gives an incomplete picture of the investment constraint. For working capital, firms may respond to lower rates relatively quickly. For long-term investment, volatility is a tax. The risk is that this constraint becomes binding again ahead of next year’s election, if political uncertainty weakens peso demand, raises country risk and forces another tightening of financial conditions.
Still, there are some encouraging signs. The special investment incentive regime (RIGI) has generated a pipeline of announced projects worth approximately $100 billion, concentrated in energy, mining and related infrastructure. These include projects in oil and gas, LNG (liquefied natural gas), renewable energy, lithium, copper, gold and silver, ports, pipelines and energy transport.
Dollar credit to the private sector expanded by more than $3.4 billion in early 2026, and capital goods imports grew at 17% per year in 2024-25, having declined between 2011 and 2023. But announcements have not yet materialised. These types of investments require institutional and political credibility as they have longer gestation periods than the investment that is historically associated with construction and domestic manufacturing.
Moreover, there is a structural reason to think that the macroeconomic conditions for conversion have improved. Trade agreements signed with the European Union (EU) and the United States provide a medium-term market access dimension in sectors where Argentina has a comparative advantage. None of this guarantees that the investment cycle will be completed on time. But it raises the probability that it will be completed.
Conclusion
Argentina’s stabilisation is beginning to look like the historical cases that lasted. Inflation has fallen, growth has returned and it is increasingly supported by exports rather than by public spending or another short-lived consumption boom.
The recovery is also changing the structure of the economy. The sectors with the greatest potential, such as energy, mining and agriculture, are more capital-intensive, more export-oriented and often located outside the urban labour markets where employment and wage concerns are most visible.
At the same time, construction and import-competing manufacturing remain weak. These sectors matter for urban jobs and the industrial belt of Greater Buenos Aires. Their adjustment is part of the transition to a new growth model, but its social and political costs are immediate.
The challenge is whether the new export sectors can generate enough spillovers for the rest of the economy, and whether they can do so quickly enough. This is Argentina’s second test.
The new sectors need investment to scale, and investment needs confidence that the programme will survive. Weak jobs and wages in the old sectors raise the risk of political reversal, while that same risk can delay the investment that is needed for the new sectors to expand.
Growth is real. The question is whether it can become fast enough, broad enough and visible enough before the political clock runs out next year when elections take place.
Where can I find out more?
- Inflation stabilization and nominal anchors: A 1994 study by Guillermo Calvo and Carlos Végh, published in Contemporary Economic Policy.
- Stabilization programs in chronic-inflation countries: evidence from Latin America: A 2025 study by Gabriel Palazzo, Martin Rapetti and Joaquin Waldman, published in Oxford Development Studies.
- Argentina: 2026 Article IV Consultation, etc: Recent IMF report.
- Argentina after US support: how to get the stabilisation plan back on track: Report by Ernesto Talvi for the Elcano Royal Institute in October 2025.
Who are experts on this question?
- Alejandro Werner
- Guido Sandleris
- Ricardo Hausmann
