Has Milei's "Chainsaw" Pulled Argentina Out of a Recession?

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Our today’s story is about Argentina. The country has seen a massive economic turnaround. After almost a year, Argentina has exited a recession. Their GDP rose by 3.9% in the last quarter, from July to September. This marks the first time in about a year that the country has experienced growth since the recession began.

About a year ago, Javier Milei became the president of Argentina. He assumed office on December 10, 2023, after campaigning on promises of radical reforms. Milei pledged to cut government jobs, regulations, and excess spending, even using a real chainsaw during his campaign to symbolize his approach. While critics dismissed him as too radical and chaotic when he took office, his strategy now appears to be delivering results.

On the first anniversary of his presidency, Milei announced the end of the recession, stating, "Today, with pride and hope, I can tell you that we have passed the test of fire. We are leaving the desert. The recession is over, and the country has finally begun to grow. Thank you for trusting this government."

Before Milei took charge, Argentina was spiraling economically, with annual inflation nearing 200%. Since then, inflation has dropped significantly, although it remains high at 166%. Last month, inflation increased by only 2.44%, the lowest rate in over four years. For comparison, before Milei's presidency, monthly inflation was as high as 13%. The improvement is substantial, and when combined with Argentina's exit from recession, Milei appears to have achieved the seemingly impossible.

Milei attributes this success to his aggressive reforms. "We reduced the number of ministries from 18 to 8. We eliminated nearly 100 secretariats and undersecretaries. We closed more than 200 areas with duplicate or obsolete functions. We froze the salaries of high-ranking officials and fired 34,000 public employees. We are also testing the qualifications of the remaining ones," he stated.

Essentially, Milei made Argentina's government leaner and more efficient by cutting excess jobs. This approach has drawn international attention, particularly from the United States, where Donald Trump is planning similar reforms. Trump has announced the creation of the Department of Government Efficiency (DOGE), led by Elon Musk and Vivek Ramaswamy, both of whom admire Milei's methods. Ramaswamy has even called for "Milei-style cuts on steroids." Trump has praised Milei and invited him to his inauguration, signaling the possibility of Milei's reforms influencing U.S. policy.

Milei's approach has also gained fans in other countries, including Vietnam, where the communist government plans to reduce ministries to streamline bureaucracy. It seems that "Milenomics" is here to stay, with the potential to transform governments globally and address entrenched economic problems.

However, this economic turnaround has come at a price. Milei has slashed spending on social services, eliminated subsidies for public transport, heating, and groceries, and removed price controls. While inflation has fallen, basic costs have risen sharply, pushing five million Argentinians into poverty. When Milei took office, 40% of the population was living in poverty. Within six months, that figure rose to 53%.

Despite the hardships, Milei remains optimistic. "While we will have to endure a period of hardship, we will get through it. There is no night that has not been defeated by the day," he said.

The economic signs are promising. The recession has ended, inflation is declining, and there is renewed hope in Argentina's economy. However, questions remain. Is this economy working for everyone? Are those pushed into poverty willing to give Milei more time? The midterm elections next year will reveal whether Argentinians continue to support "Milenomics" or if the reforms prove too harsh to endure.