Argentina
Analysts Cut Growth Expectations and Link Lower Inflation to a Cooler Economy
Private reports and international banks said the official strategy to contain the dollar is helping to curb inflation, but is also limiting the recovery in activity. Deterioration in employment and credit is emerging as an increasingly watched factor heading into 2027.
The slowdown in inflation to 1.7% in August was welcomed by the Government, but at the same time signs of less optimism about the economy’s performance increased. According to a reconstruction by La Nación, banks, consultancies and private analysts link both movements: measures to keep the dollar under control help sustain lower prices, although they also cool activity.
According to a Barclays report cited by La Nación, the real exchange rate appears too appreciated for the current policy mix. The bank said the weakness of sectors tied to the domestic market, such as industry, construction, commerce and other services, is not explained only by Vaca Muerta or by deregulation and opening up, but by a scheme that requires a higher dollar to favor non-primary production.
Still according to that report, the Central Bank conditions the exchange rate even when it does not intervene directly. Barclays noted that when the peso began to depreciate in June, the monetary authority responded with more currency hedges, less dollar buying and higher rates. Since the 2025 legislative elections, the peso appreciated by about 15% in real terms, while three-month annualized inflation fell in both goods and services.
Barclays projected monthly inflation of between 1.5% and 2% through December and warned that breaking below that range will be difficult because of inertia and higher oil prices. In that context, La Nación reported that YPF warned that for pump prices to fall, international prices would first have to decline.
The other pillar of the official strategy is interest rates. GMA Capital indicated, according to La Nación, that one-day repos returned to the 20% annual range after having exceeded 28%. But that monetary tightening also affected credit. EcoGo and Universidad Austral calculated that in July real credit to households fell 0.7%, with a delinquency rate of 18% and 21 consecutive months of increases. Quantum Finanzas added that in August peso loans fell 0.4% in real terms and those aimed at consumption, 1.3%.
Activity data also showed weakness. Invecq estimated that in June the economy was 1.1% below December, seasonally adjusted. In July, industry fell 5% month over month and accumulated a year-on-year decline of 2.6% in the first seven months. Construction fell 4.6% in the month, although it still maintained an accumulated improvement of close to 1.7%. Mining and oil fell 0.9% month over month for the second straight month, but rose 7.7% year over year between January and July.
In the labor market, La Nación noted that industry, construction and commerce account for nearly half of formal private salaried employment. According to Invecq, since June 2025 the most dynamic sectors lost 18,100 jobs and the lagging ones about 93,000. Since December, around 46,000 registered private salaried jobs disappeared and, compared with November 2023, the drop reached 246,300.
That outlook led to a revision of projections. The 2026 Budget had forecast growth of 5%, but the IMF cut it to 3.5%. The Central Bank’s REM, which in December 2025 expected 3.5%, later lowered it to 3.2% and now projects 2.1%.
According to La Nación, investors’ and funds’ focus began shifting from inflation toward activity, employment and the social climate, in a horizon already shaped by the 2027 presidential election. Barclays warned that the labor market could become an even bigger political problem than disinflation. Consultancy 1816 said Javier Milei remains competitive for that election, although it stressed that uncertainty persists over how the Government will get there if registered employment does not improve. Econviews, for its part, said the administration has always prioritized disinflation over reactivation and warned that it will not be able to maximize reserves, activity, fiscal balance and lower prices at the same time.
Sources
About this note. Written by El Notero with assistance from artificial intelligence, based on what was published by the cited outlet. El Notero did not conduct its own reporting on this event.
