Milei's Re-election Hinges on 2% Economic Growth for Broader Sectors, Warns Economist

Economist Miguel Ángel Broda has issued a stark warning regarding the conditions President Javier Milei faces for potential re-election next year. Broda's analysis suggests that the success of the economic program and Milei's chances of remaining in office hinge on the recovery of consumption and sectors currently lagging due to recession.

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The President's re-election depends on the rest of the economy, not the part that is growing, growing two percent from here on.

"The President's re-election depends on the rest of the economy, not the part that is growing, growing two percent from here on," Broda stated in an interview. He expressed a divergence from his clients' high certainty regarding re-election, seeing instead a "very complex transition."

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For the first time in 40 years, I differ from the probability that my clients give to re-election. They see a very high certainty; I see a very complex transition.

Broda elaborated on the challenges, describing the economy's "engines are very damaged." He pointed to falling credit, declining real wages, and disposable income that, while no longer dropping, remains "in the pit." He observed a significant shift in public sentiment, with surveys indicating that unemployment and wages, rather than inflation, are now the primary concerns for citizens. "There are worrying surveys. Inflation is no longer people's priority; now the priority is unemployment and wages. Expectations about their main problem have changed enormously," Broda warned.

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There are worrying surveys. Inflation is no longer people's priority; now the priority is unemployment and wages. Expectations about their main problem have changed enormously.

The economist also highlighted a disconnect between macroeconomic figures and the productive landscape. While the overall GDP may have risen in the initial months of the year, Broda noted that excluding energy, mining, and financial intermediation, which constitute 87% of the total economy, the remaining sectors experienced "slightly negative" growth. This stagnation directly impacts employment, as these are the sectors that generate the most jobs, leading to public discontent. Broda questioned the government's ability to stimulate consumption in small businesses like corner stores or restaurants, citing limitations in fiscal policy. He also touched upon currency policy, suggesting a slightly higher dollar might improve street-level economics, but an "obsession with inflation clearly does not allow for an adjustment."

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If you take the first months of the year, GDP rose. Now, if you remove energy, mining, and financial intermediation, the rest of the sectors, which are 87% of the total, grew slightly negative.