In February, Argentina’s economy saw a 0.2% monthly decline in economic activity, marking the fourth consecutive month of decline. Despite this, President Javier Milei’s economic shock therapy plan is starting to take effect. Although the country’s economy contracted by 3.2% compared to the previous year, it was less than the expected 6% decrease according to analysts surveyed by Bloomberg.

Since assuming office in December, Milei has implemented measures such as lifting price controls, freezing public works, and devaluing the currency in order to reduce inflation. The president also allowed public wages and pensions to fall behind rising consumer prices, with the aim of reducing costs further. While Milei sees Argentina’s first quarterly fiscal surplus since 2008 as a crucial step in combatting inflation, economists are more cautious about its sustainability and its impact on economic activity.

In fact, construction activity decreased by 24.6% annually in February, while spending at small- and medium-size businesses fell by 12.6% in March – this is likely due to the significant impact that austerity measures have had on these sectors of the economy. According to economists surveyed by Argentina’s central bank, they anticipate a 3.5% contraction in gross domestic product for the year – despite Milei’s optimism about his plan’s success.

Concerns about the economic impact of Milei’s austerity measures remain high among experts who are worried about their long-term sustainability and how they may negatively affect job growth and poverty rates in Argentina.

Overall, despite some initial successes like reducing inflation and achieving a fiscal surplus, Milei’s economic shock therapy plan has had negative consequences on economic activity and raises concerns among experts about its long-term viability.

Milei has been implementing his measures since assuming office in December with an aim of reducing inflation which had reached a three-decade high of 26%. However, his efforts have had an impact on other areas such as construction activity which decreased by 24.6% annually