Argentina

Argentina’s fiscal position has improved, with a primary surplus expected to reach 1.3% of GDP by end-2025, but gross public debt remains high at nearly 80% of GDP. The government has cautiously returned to international markets, issuing a USD-denominated bond for the first time since 2018, but sovereign spreads remain elevated, reflecting ongoing investor wariness. Access to external financing is still limited, and the central bank’s reserves, while stabilizing, are not yet robust. The IMF’s Extended Fund Facility and political closeness to Washington provide a critical backstop, but target compliance is essential to avoid renewed stress. Corporate insolvencies, especially in FX-exposed sectors like agrifood and energy, have risen due to cost pressures, slow recovery in domestic demand and increased market dynamism. Construction and manufacturing also face underutilization and financing gaps. Risks of a sudden stop in capital flows or a sharp currency adjustment remain a key vulnerability.

President Milei’s administration has consolidated support after the midterm elections, but political stability remains fragile. The government’s reform agenda faces strong opposition from unions and social groups, with the risk of protests and strikes if social costs rise further. Achieving a congressional majority is still elusive, limiting the scope for decisive policy action. External relations are mixed: ties with the US and IMF are constructive, but tensions with Mercosur and rising Chinese influence in trade and infrastructure add complexity. Domestic risks include persistent inequality, urban cost-of-living pressures and the potential for policy reversals if economic conditions deteriorate. The risk of contract frustration has eased, but sudden shifts in policy or governance could still deter long-term investment. Consistent, inclusive governance is essential to maintain momentum and avoid repeating past cycles of crisis and recovery.