Argentina Economic Outlook. March 2025

Summary

In 2025, GDP is expected to grow by 5.5%, driven by consumption and investment, within a context of disinflationary consolidation and fiscal-monetary discipline. However, two key challenges remain: maintaining fiscal austerity during an election year and making significant progress in normalizing the foreign exchange market

Key points

• Key points:
• Popular support for Milei's administration remains high, making him the President with the highest approval rating 15 months into his term since Néstor Kirchner.
• The economic rebound that began in the second half of 2024 has extended into early 2025, reinforcing our growth forecast of 5,5% in 2025, underpinned by a recovery in consumption and rising investment, though with significant sectoral heterogeneity.
• We expect the crawling peg to continue until October (with minor changes after the agreement with the IMF), contributing to mitigate the usual pre-election volatility. After the midterms, a gradual dismantling of capital controls is likely to be introduced, involving a correction in the official FX rate (projected at ARS/USD 1,400 by December 2025).
• The combination of tight monetary policy and a managed exchange rate has driven a slowdown in inflation, which is expected to end 2025 at 30%. However, the recovery in economic activity and real wages, along with pending adjustments in regulated prices, will place limits on the speed of disinflation.

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