Solange Rial 
Economic activity dropped 4.3% in January compared to the same month in 2023. This is the first complete Monthly Estimator of Economic Activity (Emae, for its Spanish initials) report of the Milei administration.
This is the third month in a row the economy has fallen, after registering drops of 0.9% and 4.9% in November and December of 2023, the latter being the worst fall in the second semester of last year. Compared to the seasonally adjusted measurement, the January EMAE contracted 1.2%. The National Institute of Statistics and Censuses (Indec, for its Spanish initials) published the data on Tuesday.
Only five economic sectors grew in January (compared to December). The standouts were agriculture, livestock, hunting, and forestry (an 11.1% increase YoY), as well as mining and quarrying (5.2%). On the other hand, ten sectors registered interannual drops, among them construction (-16.9%), fishing (-13.5%) and financial intermediation (-12.6%).
“It was slightly better than expected but within the expected range given that it is the first data of Milei’s government,” economist Jorge Neyro told Herald sister publication Ámbito.
“Agriculture and mining are the most dynamic sectors, while industry, construction, financial activity, and commerce are the most recessive sectors; these are trends that will continue in February and March,” he added.
Chief Economist of Fundación Libertad y Progreso, Eugenio Marí, also weighed in. “Sectors directly linked to domestic demand, like construction, which was greatly affected by the inflationary crisis, were hit the hardest. On the plus side are the most competitive sectors of the Argentine economy, like agro-business and mining.”
A comparison to the 2001 crisis
Equilibra consultant firm founder Lorenzo Sigaut Gravina compared the recent EMAE report to the 2001 crisis.
“Inflation accelerated due to the devaluation in both scenarios. In 2002, the exchange rate went from 1 to 1 to almost AR$4 pesos per U.S. dollar. In mid-December of last year, it went from AR$350 to AR$800 per dollar. In both cases, economic activity fell sharply,” he said.
Graviña also explained the differences between the two situations. “In such a recessionary context (in 2001 there was also very high unemployment) the pass-through of the devaluation to prices was low (prices rose only 41% in 2002). But, to some extent, after the exchange rate shock and sharp inflation growth, in both situations we later saw a strong recession and reduction in inflation.”
What to expect in the coming months
“The items more linked to domestic demand should improve in the second half of the year, hand in hand with wage improvement,” said Neyro, adding that perhaps the biggest unknown is whether recovery will start in April or May, or if we will have to wait until June or July.
As to whether the lifting of the cepo could have a positive influence, he said that it depends a lot on how it is finally implemented. “Reducing the payment terms for imports, which are currently up to 120 days, is what would most help economic activity today.”
Marí, on the other hand, said that once inflation is stabilized, the government will have to start paying attention to the real economy.
“Unfortunately, Argentina has enormous competitiveness problems due to the fact that it had a closed economy model with high state intervention. In addition to that, public debt problems have left the country without credit, so we do not have the mechanisms to defer the costs of the transition,” he said.
For Graviña’s opinion, economic activity will most likely recover in the next few months, but first it will have to find its bottom point. “We do not know at what speed the recovery will take place,” he said.
