Milei's radical course: Argentina's economic awakening under chainsaw!

Milei's radical course: Argentina's economic awakening under chainsaw!

Javier Milei, President of Argentina since December 2023, has introduced an ambitious and radical reform program to stabilize the country's severely ailing economy. In the midst of over 100% inflation and a significant budget deficit, Milei positioned himself as a libertarian and developed a concept known as the “chainsaw program” to drastically reduce the state apparatus. These measures include a reduction in ministries from 18 to 9 and the dismissal of around 50,000 public sector employees.

Milei consistently rejected the socialist economic policies of the previous Peronist government and replaced them with future-oriented approaches. The focus is on liberalizing the labor market and simplifying tax laws and legal procedures. State-owned companies are to be partially privatized and price controls and export restrictions are to be lifted. These fundamental changes aim to establish the market as a solution to economic problems and promote a cultural shift towards personal responsibility.

First successes and challenges

The reforms are already showing initial success: the inflation rate, which was an alarming 25 percent in December 2023, fell to just 3.1 percent by April 2025. Forecasts suggest that inflation could actually fall below two percent in the second half of 2025. This has led to a stabilization of the Argentine peso, which has appreciated against the US dollar. The achievement of a budget surplus also came faster than expected, adding to investor optimism, particularly in the technology, agriculture and mining sectors.

Despite these positive developments, the social situation remains tense. Currently, around 40 percent of Argentines live below the poverty line, underscoring the challenges facing the government. Nevertheless, Milei has seen growing support in recent polls, reflected in his party's doubling of votes in Buenos Aires city elections.

Economic indicators and outlook

Argentina's economic output had experienced a dramatic decline at the start of Milei's term, with gross domestic product expected to decline for the sixth consecutive time in the third quarter of 2024. Nevertheless, there have been signs of recovery for several months, particularly in the quarterly GDP figures. The government achieved a budget surplus in every month of 2024 except July, supporting stability.

The central bank has cut its key interest rate by 98.0 percentage points since Milei took office, leading to a surge in private lending and fueling hopes of an economic revival. The new regulation to encourage investment and the abolition of some import taxes are intended to provide additional impetus. Negotiations with the International Monetary Fund (IMF) to support Argentina's economy are also underway, with the country having already received over $40 billion.

However, there are numerous risks, including possible currency instability, political opposition and the impact of extreme weather on agriculture. The economy will continue to try to thrive in the new conditions, with expectations for above-average GDP growth in 2025.