Lorena Giorgio: 'It's Not Clear That the Macroeconomics Derived From This Economic Model Will Win Elections'

Lorena Giorgio, chief economist at Equilibra, expresses concern that the macroeconomic outcomes of Argentina's current economic model may not be sufficient to secure electoral victories. Analyzing the activity and labor market dynamics following the government's shift in 2023, she points to a "profound change in the productive matrix."

Giorgio acknowledges positive developments, particularly in the external sector, driven by exports from Vaca Muerta, agriculture, and mining potential. She also commends the Central Bank of Argentina's (BCRA) reserve accumulation in the first half of the year. However, she identifies fragility in other sectors struggling with demand fluctuations and competition from imported goods.

Regarding fiscal policy, Giorgio states the government is determined to maintain balance. Despite a real-term decline in revenue between August 2025 and April 2026, the government responded with spending cuts to keep fiscal accounts balanced. She notes, however, that there is little room left for further expenditure reductions. Indexed components of spending increase as inflation slows, social benefit recipients have been significantly reduced, public works are minimal, and public sector wages have seen substantial real-term decreases. Provinces, having already absorbed a significant portion of the adjustment, may seek negotiation power with the executive branch to ensure a calm legislative transition leading up to the 2027 elections.

The positive news includes a revenue rebound in May, ending a nine-month streak of year-on-year real-term declines. Privatizing state-owned companies, if finalized, could also bolster government income independently of tax collection. The downside is that without sustained revenue growth, the government has minimal capacity for social fiscal policy. Compared to the January-September 2023 average, total registered income has fallen 7% in real terms, pensions by 13-14%, and public salaries by 22%.