Argentina Country Risk Report

Several economies, one future

SENSITIVE RISK

Economic risk
Business environment risk
Political risk
Commercial risk
Financing risk

Economic risk
Business environment risk
Political risk
Commercial risk
Financing risk

Updated in September 2025.

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Form of state	Presidential republic
Head of state	Javier Milei (President)
Next elections	2025, legislative

Strengths & Weaknesses

Steadily declining inflation amid sustained fiscal surpluses and FX regimen transition.
Growth expected to outperform others in the region and significantly improved country risk, which has enabled the country to cautiously return to capital markets and incentivized investment.
One of the few Latin American economies with a trade surplus in early 2025, thanks to surging exports due to the rebound in agricultural and industrial goods.

Despite economic gains, reforms are politically sensitive and socially costly, risking public pushback and weakening reform durability.
Still limited access to international capital markets and low foreign reserves, making it vulnerable to global shocks.
High informality, low productivity and institutional weaknesses, which may hamper long-term growth.

Economic Overview

Firmly on track but still fragile

President Milei’s administration has delivered notable progress in Argentina, including a smooth rollout of a new FX regime, bringing down monthly inflation to 1.9% in August, fiscal surpluses reaching 0.6% of GDP, a rebound in economic activity and real wages and poverty reduction. Real GDP is expected to grow +4.4% in 2025 and +3.5% in 2026 as the initial enthusiasm and excitement fade and the medium-term negative effects of the shock therapy materialize Even if the economy grows slower than expected, it should still be the fastest growing large market in Latin America. An early recovery came in already in the second half of 2024. Inflation is forecast to drop from 118% at end-2024 to between 18-23% by the end of 2025, reaching single digits by 2027. Our forecast for average inflation is currently set at 16-20% for 2026.

Argentina’s economy faced a challenging path in 2024, marked by a second consecutive year of negative GDP growth (-1.7% after -1.6% in 2023), sharp fiscal consolidation and 220% average inflation. The administration enacted policies such as a 120% devaluation to correct foreign exchange distortions, discontinuation of monetary financing and a fiscal adjustment of approximately 5% of GDP. These measures helped narrow the foreign exchange gap and improve international competitiveness. However, they came at a high cost to economic activity. Net exports remained the sole growth driver throughout the majority of 2024 as fiscal austerity limited domestic investment. With poverty rates exceeding 50%, the government implemented targeted social benefits and governance reforms to soften the social impact. Finally, the IMF approved a new four-year, USD20bn Extended Fund Facility for Argentina in April 2025, with an initial USD12bn disbursement to support ongoing stabilization and reform efforts. Argentina established a managed floating exchange rate system for the peso, which is now allowed to trade within a band that is set to expand on both ends, providing a controlled environment for currency fluctuation. This policy shift marks a departure from the previous tightly managed crawling peg system, but values in September 2025 could have easily fallen out of the band had the central bank not intervened by depleting its own reserves. The Central Bank of Argentina, in fact, keeps intervening to maintain the peso within the band – provided that foreign reserves provide room to do so.

The IMF agreement also includes objectives such as rebuilding net foreign reserves by USD4bn and achieving a primary fiscal surplus of 1.3% of GDP by the end of 2025. Long-term goals include strengthening external buffers and regaining access to international capital markets. The government has also committed to enhancing financial transparency, aligning Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) standards with global norms and deregulating the economy to boost formalization.

Will history repeat itself?

The short-term outlook includes a combination of hype and skepticism about the political durability of Milei's agenda, which mirrors historical patterns seen with other presidents. These reforms have led to a decline in black market currency trading and increased access to dollars for citizens and businesses. Improved market sentiment is reflected in a drop in Argentina’s risk premium, enabling the issuance of a USD1bn local law bond in late May and paving the way for fuller market re-entry.

At the same time, challenges remain. Informal workers and those with stagnant wages continue to face difficulties, and political stability will be further tested after the legislative election in October. Furthermore, macroeconomic normalization is already weighing on sectors with FX incomes and will produce more insolvencies in the short-term. These sectors are mainly agrifood and energy, which bill in USD by converting the value from a nominal price in ARS. At the same time, their costs have been rising compared to last year, because there is still a high inflation rate, which affects profit margins. To a lesser extent, construction is also affected as property sales prices are also in USD and financing remains insufficient, as demonstrated by the fact that it is the only sector alongside manufacturing whose utilization rates have not fully recovered yet.

On the other hand, upside risks to our GDP forecast include lower-than-expected inflation, which would boost real wages and raise purchasing power, along with continuous compliance with the IMF requirements, both of which do not fall under our baseline scenario. Only a small handful of Argentina’s IMF programs – often cited as two or three, the last being under then-President Nestor Kirchner in 2006 – have been completed as originally agreed, while most of them have ended prematurely or been replaced due to non-compliance or economic crises. Sustaining momentum under this 23rd IMF program will require balancing fiscal discipline with social inclusion.

Por una cabeza – By a head?

Political stability and external relations will shape Argentina’s broader economic environment in 2025-2026. President Milei’s administration has made significant strides in deregulation and fiscal reform, but its ability to maintain momentum continues be tested. La Libertad Avanza’s (LLA) popularity, supported by an improving economy, positions it to gain seats in Congress, but achieving a majority remains challenging though key to influence decisively policymaking in 2026-2027.

Internationally, Argentina seeks to strengthen ties with key partners. Relations with the US may offer opportunities, considering the collaboration with the IMF and the need to convince investors to put money on long-term initiatives. However, tensions with the Mercosur bloc, limited complementarity with US trade, China’s strategic influence in Argentina’s infrastructure and agriculture and increasing import dependence (particularly from China) add layers of complexity and risk penalizing some industries.

Domestic political risks include social discontent stemming from working poor segments, increased polarization of policy agendas and enduring inequality. While sectors like mining and energy thrive, urban areas face rising living costs and constrained consumption. Contract frustration risks are reducing, but sudden policy reversals could still deter long-term investment, underscoring the need for consistent governance.

Trade structure by destination/origin

(% of total, annual 2022)

Exports	Rank	Imports

Trade structure by product

(% of total, 2022)

Exports	Rank	Imports

Contacts

Luca Moneta

Senior Economist for Emerging Markets

luca.moneta@allianz-trade.com