BUENOS AIRES — President Javier Milei confronts a growing economic challenge: maintaining his strict fiscal plan while inflation accelerates and public support erodes.
Milei, who swept to power with promises to slash government spending, acknowledged this month that "not everyone is better off" under his administration. He pledged to continue the strategy regardless. "I will maintain fiscal austerity," he said. "The chainsaw is still running."
The government initially won economic ground. Inflation fell from 12.8 percent in November 2023 to 1.5 percent in May 2025. The trend reversed sharply. By late March 2026, inflation reached 3.4 percent and has risen for 10 consecutive months.
Milei's earlier promises that monthly inflation would fall toward zero by August or end the year around 10 percent have collapsed. The government is avoiding policy shifts that might accelerate prices further.
Household finances deteriorated sharply. Real wages dropped 6 percent between November and March, according to Banco Provincia. Rising global fuel costs, linked to the war in the Middle East, added pressure.
Milei has rejected traditional stimulus. He dismissed Keynesian spending as "garbage" and views inflation as purely monetary, ruling out the subsidies and public employment programs that defined earlier Peronist administrations. Instead, his government is pursuing narrower credit measures: the Central Bank this month reduced bank reserve requirements to lower interest rates and spur lending.
The strategy faces obstacles. Household delinquency reached 11.2 percent in February, the highest on record, according to consulting firm 1816. Banks are reluctant to extend new credit into that environment.
Milei's budget cuts and labor reforms have earned backing from Argentina's private sector. Other policies rankle key industries. Piecemeal tariff reductions and the government's refusal to bail out failing firms contrast sharply with the rescue packages common under the Kirchner presidencies.
Paolo Rocca, chief executive of steelmaking and engineering giant Techint, complained after his company lost a pipeline tubing contract to an Indian competitor—the first such domestic tender loss in company history. He signaled an anti-dumping challenge.
Milei is also phasing out currency controls, a step former President Mauricio Macri attempted in 2015 only to reverse four years later. Milei's approach unfolds in a context of greater economic stability and a balanced budget. The policy has eased imports: Decathlon opened its first Argentine store this year.
At an AmCham business conference, Milei projected recovery ahead, predicting "disinflation with greater growth" and calling April the start of "the best 20 months in recent decades." He asked Argentinians for patience.
