Argentina’s Economic Activity Records Sharpest Contraction Since 2023 Amid Industrial Struggle

Argentina’s economy contracted 2.6% in February as retail and manufacturing struggle, testing President Milei’s reform agenda despite a record trade surplus.

By: AXL Media

Published: Apr 23, 2026, 10:22 AM EDT

Source: Buenos Aires Times

February Slump Defies Market Expectations

The 2.6 percent monthly drop in economic activity, reported by the INDEC national statistics bureau on Wednesday, caught many economists by surprise. Bloomberg Economics had initially estimated a much milder 0.5 percent decline. On a year-over-year basis, the GDP proxy fell 2.1 percent, a sharp contrast to the 0.4 percent growth seen in January. This cooling of momentum suggests that the initial optimism sparked by gains in late 2023 and early 2024 is being tempered by a deep recession in blue-collar industries and a stagnation in consumer purchasing power.

Trade Surplus and Export Resilience

Despite the domestic slump, Argentina’s external accounts are showing signs of significant strength. March data revealed a trade surplus of US$2.5 billion, the highest recorded for that month since 1990. This surplus was driven by a dramatic surge in exports, which rebounded from a 14.5 percent drop in February to a nearly 20 percent increase in March. JPMorgan analysts described this as a "clear sign of economic momentum" in the export-oriented sectors, totaling a first-quarter surplus of US$5.3 billion. This influx of foreign currency is vital for the Central Bank’s efforts to rebuild depleted dollar reserves.

Inflationary Pressures and the Disinflation Campaign

While President Milei has vowed to bring monthly inflation below one percent by the end of the year, the campaign has recently lost some of its initial velocity. Monthly inflation picked up to 3.4 percent in March, marking ten consecutive months without a significant slowdown. Although these figures represent an improvement from the hyperinflationary risks inherited by the administration, the persistence of price increases remains a critical challenge for the government's credibility and the public's tolerance for further economic tightening.