Inflation Is Falling, But Argentines 'Are Not Yet Better Off': Milei's Gamble Under Fire

Argentina’s sharp economic reforms cut inflation but pushed more than half the population into poverty, raising questions about President Javier Milei’s austerity drive.

Monthly inflation dropped to 2.7% in December from 25.5% a year earlier, according to The Economist, citing data from INDEC, the national statistics office. The decline followed Milei’s deep cuts to government spending, including laying off 30,000 government workers and slashing energy subsidies.

Yet poverty rates jumped to 53% from 42% in late 2023, according to the Catholic University of Argentina. "Argentines are not yet better off than they were a year ago," The Economist said, noting that consumer spending fell 20% while construction activity dropped 29% over the same period.

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Basic costs have soared since Milei took office. Bus and train fares in greater Buenos Aires jumped more than 300% after transport subsidies ended. Electricity and gas prices shot up 430%. Overall, consumer prices in the capital region climbed 122%.

The cuts hit pensioners and construction workers hardest, according to The Economist. Lower pension payments and reduced public works spending made up nearly half of Milei’s 2024 budget reductions, the Centre for Political Economy of Argentina said.

“There has been a very high social cost attached to Mr Milei’s austerity programme of slashing services and jobs,” The Guardian reported last week. Falling wages left many Argentines unable to afford health insurance, straining public hospitals.

Milei’s team defends the reforms as needed medicine for an economy damaged by his predecessor’s deficit spending and price controls. The central bank printed money to cover budget gaps, sending inflation soaring and crushing the peso’s value.

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Some economic indicators show improvement. The stock market rose and Argentina’s perceived financial risk fell. The economy grew in 2024’s third quarter after Milei lifted price controls and cut spending by about 30% in real terms.

Yet challenges remain. Argentina needs fresh funding from the International Monetary Fund as its $44 billion loan runs low. Milei wants to lift strict currency controls propping up the peso but requires IMF support first.

Public backing for Milei stays strong despite the economic pain. Nearly half of Argentines support him even though only 20% view the economy positively, polling firm AtlasIntel found.

The president’s reform agenda faces mounting pressure to deliver relief to struggling citizens. While inflation dropped, living standards for most Argentines haven’t improved from a year ago.

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