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Mauricio Monge: 'There is optimism about the country, but with reservations; investors are not rushing in headfirst'
🇦🇷 Argentina /Economy & Trade

Mauricio Monge: 'There is optimism about the country, but with reservations; investors are not rushing in headfirst'

From La Nación · () Spanish

Translated from Spanish, summarized and contextualized by DistantNews.

At a glance

Analysis Named sources Context piece
  • Argentina's economic outlook is viewed with optimism tempered by reservations, according to an economist from Oxford Economics.
  • While praising structural reforms like price adjustments and currency control dismantling, concerns remain about disappointing economic activity, particularly in domestic sectors.
  • Projections indicate continued exchange rate pressures and rising banking sector non-performing loans, though the macroeconomic impact is seen as limited due to low private credit levels.

Argentina's economic trajectory under the Milei government is met with cautious optimism abroad, according to Mauricio Monge, a senior economist specializing in Latin America at Oxford Economics.

Optimism, but with reservations.

— Mauricio MongeDescribing the external assessment of the Argentine government's economic policies.

Monge acknowledges the administration's progress on "structural changes," such as adjusting relative prices and dismantling currency controls. However, he also points to "disappointing" economic performance, especially within domestic sectors like construction, manufacturing, and retail, which are key drivers of employment. This stagnation in private consumption is seen as a significant macroeconomic concern, limiting overall growth.

It is a worrying issue from a macroeconomic point of view, regarding growth, because private consumption is being limited. And by limiting private consumption, it limits growth, especially for the domestic economy, which has been practically stagnant this quarter.

— Mauricio MongeExplaining the impact of limited private consumption on economic growth.

Looking ahead, Oxford Economics forecasts continued exchange rate pressures for the remainder of 2026 and into the second half of 2027. They also anticipate a rise in banking sector non-performing loans. Despite these challenges, the macroeconomic impact of potential defaults is considered relatively small. This is attributed to the low percentage of private credit as a share of GDP compared to other Latin American countries, meaning a rise in bad loans would have a limited effect on the overall economy.

In our projections of real interest rates, we go from very negative real levels in 2024 due to inflation, to positive and high interest rates in 25, 26, 27 and probably 28. And given that the sectors that generate the most employment are not growing, real income or real wages will grow slowly, probably remaining stagnant.

— Mauricio MongeDetailing the projected trajectory of interest rates and real wages.

Real interest rates are projected to shift from negative territory in 2024 to positive and high levels through 2028. This, combined with stagnant real wages due to the lack of growth in employment-generating sectors, suggests that private consumption will continue to grow slowly. While banks may refinance some debt, Monge cautions that a shift in loan classifications does not necessarily signify an improvement in borrowers' financial health, as they will still face high interest rates and low wages.

At the financial level, the country has an advantage, in quotes, which is that private sector credit represents very little as a percentage of GDP, when you compare yourself with countries like Brazil, Mexico or Colombia.

— Mauricio MongeHighlighting Argentina's lower private credit exposure compared to regional peers.
DistantNews Editorial

Originally published by La Nación in Spanish. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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