Argentina Economic Activity Falls 2.9% in July, Worst Month Since 2020

Argentina's economy contracted sharply in July, shrinking by 2.9% year-on-year and marking the worst monthly decline since September 2019, according to official data released by the National Statistics Institute (INDEC) on Thursday. The slump erased June's modest gain and brought the economy closer to a technical recession, where two consecutive quarters of decline are required.

Banco Provincia described the fall as the fourth-largest monthly drop since 2004, highlighting its severity compared to devaluations and the 2008 international crisis.

The monthly decline more than wiped out the previous month's 0.3% growth, which had been revised downward to 0.3% from an initial estimate of 0.8%. Argentina's economic activity has slipped in four of the first seven months of 2026, with INDEC's revised series illustrating the downward trend. The data showed activity flat in January, a 2.2% decrease in February, a rebound of 2.7% in March, followed by further declines in April (-1.4%) and May (0.6%), before July's 2.9% contraction.

The quarterly GDP figures also mirrored these fluctuations, with growth of 0.7% in the first quarter and a 0.6% contraction in the second quarter, though both were still above the same periods a year earlier. Notably, eight out of 15 sectors experienced year-on-year declines, with commerce falling 5.1% and manufacturing 4.6%, collectively contributing to a 1.3-point reduction in the annual figure.

Construction contracted by 3.3%, while mining and oil sectors grew by 8.4%, and farming increased by 0.7%. However, fishing showed a remarkable surge, more than quintupling, but this alone was insufficient to offset the overall decline.

The economy appears to rely heavily on primary sectors like mining and farming for growth, with limited support from other sectors. Economists attribute the downturn to a weak local currency, stagnant real wages, and insufficient credit recovery. Factors such as the World Cup in June and July may have played a smaller role. Economy Minister Luis Caputo emphasized Argentina's 1.7% growth so far in 2026, attributing the July slump to temporary shocks, including gas shortages, severe weather, and reduced working hours during the football tournament.

The government is implementing measures, such as offering cheaper dollar loans to companies and state pension-fund funding for mortgages, in hopes of stabilizing the economy.

Despite these efforts, the economy remains vulnerable, with economists predicting that August and September would need to grow by approximately 3% each to avoid a second consecutive quarterly decline. If September's growth falls short of this threshold, the country could be on the brink of a technical recession. The government's strategy focuses on both supply-side improvements and demand-side stimulus through mortgage financing.

As the 2027 election cycle looms, the economic performance will likely influence President Milei's re-election prospects. The next economic data points will be released in October and November, providing clarity on whether the economy will continue its volatile saw-tooth pattern or signal a deeper downturn.