Argentina economy heads toward recession as austerity squeezes consumer sectors

Traders Union
All News
Economic Data
Argentina economy nears recession

Highlights

Eseka and Dakuba report sales plunging 40% since December 2023 as domestic consumption falls and imports from China intensify competition.
Argentina enters technical recession after GDP drops 0.6% in Q2 and economists expect an additional 1.5% contraction in Q3, per Analytica.
Milei's austerity measures slow inflation to 30% from 200%, but manufacturing drops 3.2% and poverty climbs to nearly one-third of the population.

Consumer slump deepens pressure on local industry

As reported by Reuters, manufacturers and retailers tied to Argentina's domestic market are facing a prolonged drop in sales as weaker consumer demand combines with rising competition from cheaper imports after the government eases trade restrictions.

At family-owned clothing maker Eseka in Buenos Aires, sales have fallen about 40% since Milei takes office in December 2023, according to owner Ricardo Kuchikian. The company posts losses last year and cuts about 30% of its workforce, while more than half of the circular knitting machines in its sock factory stand idle.

That weakness matters because household consumption accounts for about two-thirds of Argentina's gross domestic product. Market research firm Scentia says consumption in the first nine months of the year falls 2.7% from the same period in 2025, while think-tank Fundar says 32,300 businesses, about 6% of the country's total, close between December 2023 and July.

Other local companies report similar strains. Martin Abigador, director of fabric distributor Dakuba, says sales have fallen 40% since the end of 2023 and the business cannot offset what he describes as aggressive competition from imported goods, mainly from China.

Recession risk tests Milei before 2027 vote

Economists say Argentina likely records a second straight quarterly contraction in July through September, which would meet the common definition of a recession. Official data for the quarter is due in November.

Ricardo Delgado, head of consultancy Analytica, says the economy is technically in a moderate recession after gross domestic product falls 0.6% in the second quarter from the first. He forecasts a further contraction of around 1.5% in the third quarter, though a slight rebound is expected in 2027.

Milei's austerity measures help slow inflation to 30% from about 200% and ease broader macroeconomic imbalances, but the gains have yet to spread evenly across the economy. The share of Argentines living below the poverty line rises to nearly one-third of the population after falling to an eight-year low in 2025, while official August data shows manufacturing declines 3.2% year on year, retail and wholesale trade drops 3.5%, and construction falls 2.5%, according to INDEC.

Export-oriented sectors including energy, mining and agriculture remain stronger, supported by investment and external demand, but that has not offset weakness in textiles, auto manufacturing, retail and construction. A recent survey by consultancy Giacobbe y Asociados shows Milei's approval rating slips to 36% in October while disapproval rises to 56%, underscoring the political risk as the government insists it will not change course.

Our earlier article on Malaysia’s review of enforcement around foreign products and businesses entering the domestic market explained how the government moved to address pressure on local SMEs as digital trade expands. It also covered plans for an inter-ministerial working committee, progress on an e-Commerce Bill, and the “Jom Beli Produk Malaysia” initiative backed by Budget 2027 funding to boost local product promotion and SME participation in digital and overseas markets.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.