The government has been demonstrating that it meets the economic expectations of its electorate and very few voices dissent from this diagnosis.
A record trade surplus allowed it to purchase reserves for an amount significantly greater than the targets agreed upon with the IMF for the entire year.
Inflation is on a clearly descending path where the latest available core number stood at 1.6%, wholesale at 1.1%, and market consensus places it below 1.5% by the end of this year. For the elections, the long-awaited start arrives at 0.
The GDP has been growing for two years, and although it does so unevenly, the most competitive sectors (agriculture, energy/mining, and financial services) are growing at a pace that more than compensates for the decline in sectors linked to the domestic market, although it has not yet translated into employment.
Formal and informal incomes on average have recovered inflation but there is a portion that resigns itself to lower consumption to meet the payment of tariffs and services that the poorer individuals (who still pay significantly lower tariffs than the real price) subsidized for the middle and upper classes from 2019 to 2023.
Private consumption, which includes all goods and services in the economy, is at its peak but mass consumption, which during times of high inflation is an important tool to protect against the constant loss of purchasing power, has not fully recovered partly due to the high tariffs that the middle class must face and the greater propensity to save that the upper middle and upper classes choose when they have a surplus that in dollars starts to become attractive for saving and investing.
So far, what has been achieved comes after inheriting a catastrophe in terms of relative prices, negative international reserves, and a ticking time bomb of internal debt in pesos ready to explode literally every day.
What to expect for the next 12 months
Now let’s analyze with this new starting point what we can expect economically for the next twelve months and where this path would leave us in electoral and political terms.
Does the government have a strategy to leverage the momentum of stability through a framework of laws and initiatives that accelerate the economic growth of activities more linked to the domestic market, such as industry, commerce, and construction?
First of all, the Minister of Economy has just announced the financial plan for 2026-2027 providing sufficient details on what the sources will be to secure the necessary funds to meet capital and interest maturities. There are two underlying pieces of information in that presentation that, although implicit, do not go unnoticed.
On one hand, it is not ruled out (although it is not specifically planned) that there will be access to international markets to further reinforce the amount of dollars needed, especially if the country risk continues to converge to a more appropriate rate for Argentina's macro reality.
On the other hand, it is not known but it can be inferred that there are confidential agreements with the U.S. Treasury to achieve assistance similar to that received in 2025 if a similar situation were to arise, using an already established instrument like the SWAP implemented at that time.
With a dollar that continues to float comfortably within the bands, the BCRA will continue to buy and accumulate reserves from the inexhaustible exports of oil, gas, mining, and agriculture/livestock. There does not appear to be a near-term exchange rate that will breach 1500 pesos, but neither one that will exceed 1800 by the election date.
It seems difficult that the trade surplus will not reach 25B this year and that the current account will not be positive.
With inflation persistently declining below 1% monthly at some point in the first half of next year, the nominal salary, which always adjusts looking at indices from 2-3 months back, will continue to improve in real terms and that improvement will lead to a gradual recovery of mass consumption and a decrease in banking delinquency supported by a refinancing process with lower rates and longer terms, as the Banco Nación is already doing.
The interest rate in pesos for individuals and SMEs will stabilize at the end of this year at a real annual rate of 15%, which is of course high compared to other Latin American countries but will allow for a restart of credit dynamization, the engine of growth for any economy in the civilized world. Here we are talking about a monetization in pesos resulting from a greater genuine demand for money.
But if Congress approves the Fiscal Innocence II project in the coming weeks, it is possible that around 150,000 taxpayers (less than half of those already registered in the simplified profit regime) will withdraw an average of 100,000 dollars from their mattresses, allowing approximately 15 billion dollars to enter the banking system.
A new capital markets law could enhance and create long-term investment instruments that channel the use of those savings into dollar-denominated mortgage loans at a rate of ¿9% per year? that could generate a boom in construction, one of the activities that creates the most employment and consumption in other sectors of the economy. Here we are talking about a monetization in dollars taking advantage of the advantages of a country with a high potential for endogenous dollarization.
For all these reasons, it is expected that the GDP this year could grow at a rate close to 4% with exports increasing by 15% and private consumption by 3%.
In this scenario, the consumer and government confidence index would likely show sustained improvements and by the end of the year most electoral surveys would reflect that President Javier Milei would be very close to securing reelection, even with a united Peronism, something that today seems quite difficult to achieve.
In this context, the virtuous circle spirals. More encouraging economic numbers lead to more optimistic surveys that leave electoral uncertainty in a much more limited space for opposition opportunism.
