Argentina FX Focus 2H headwinds to take hold

Research evidence excerpt

Argentina FX Focus 2H headwinds to take hold

Currencies ● Latin America

24 June 2026

Multi-speed economy

Primary sectors outperforming

The Argentine economy continues to witness a multi-speed economy. On the one hand, primary

sectors have been doing well, especially the oil & gas and agricultural sectors, owing to

increasing local production alongside high global prices. However, the manufacturing and

services sectors have been struggling, with an overvalued currency partly to blame. This has

also created a divergence in fortunes between urban and rural parts of the economy and, most

importantly for markets, impacted President Milei’s approval rating, which hovers around 40%.

As for growth, we see the economy decelerating to 3.5% this year given the aforementioned

dynamics, although activity appears to be bottoming out in 1Q and we should see a modest

recovery throughout the rest of the year. The government is focusing on accelerating growth,

primarily through reform implementation and monetary policy settings. While Argentina has yet to

establish a more conventional monetary policy framework, market interest rates have been driven

lower lately (Chart 1), which should help boost activity at the margin, while also contributing to our

expectation for modest FX depreciation for the remainder of 2027. We see growth rebounding to

3.9% next year, still driven by primary sectors, but more balanced than in 2026.

Fiscal balances under control, inflation improving

Fortunately, the government has continued to improve Argentina’s fiscal outlook by keeping

expenditure firmly under control. The government appears on track to achieve a primary surplus

of 1.5% of GDP this year, which is stabilizing debt and, most importantly, improving inflationary

dynamics.