Market considers economy in recession as it curtails 2026 growth prospects

Recent market forecasts indicate that the Argentine economy is projected to experience a recession in 2026, with growth significantly lower than initially anticipated. The Central Bank's monthly Market Expectations Survey (REM) gathered insights from over 40 participants, including local and international consultants, research centers, and financial institutions.

These forecasts projected a contraction of the economy's gross domestic product (GDP) by 1% in the third quarter of 2026, compared to the 1.1% growth projected in the previous month. This decline would mark the economy's first technical recession since data began being recorded. The deterioration in economic prospects is attributed to poor performance from key sectors such as industry, commerce, and construction, which have not been offset by the export boom in minerals, energy, and agriculture.

Manufacturing, in particular, has been severely affected, with a 1.9% rise in August after a 5% decline in July. Despite this, the forecast for the last quarter of the year remains optimistic, with a projected growth of 1.8%, marking a 0.5 percentage point increase from the previous survey (+1.3%). However, the overall projection for 2026 has been revised downward, from an estimated 2.1% year-on-year growth to 1.5%.

Factors contributing to this downward correction include the weakened performance of real economy sectors and the expected rise in inflation and unemployment rates. The unemployment rate is projected to reach 7.5% in the third quarter of 2026, with the fourth quarter seeing a further increase to 7.7%. Inflation is expected to rise to 1.9% in September, from the previous 1.8%, and will close at 30% for the year.

Exchange rate projections improved, with the Argentine peso expected to strengthen to AR$1,545 per U.S. dollar by October, a 11.5% year-on-year increase from the previous rate of AR$1,545.