After being elected as President of Argentina, Javier Milei faces significant challenges with uncertain outcomes. Despite his campaign promises of strong measures to address economic imbalances, these measures would cause an abrupt and deep economic adjustment that could threaten financial stability.
Moody’s Investors Service Vice President Jaime Reusche stated that the consensus necessary for reform implementation is crucial, and the lack of party structure and distribution of power in Congress could hinder Milei’s ability to implement corrective policies. Similarly, JP Morgan warned about governance risks and the need for a draconian fiscal adjustment to rebuild the central bank’s foreign exchange reserves.
JP Morgan also highlighted the importance of quickly closing the fiscal gap in a sustainable manner as an anchor to generate credibility in the future. The bank forecasts a considerable fiscal consolidation effort next year, with a primary fiscal balance consistent with an overall result of -1.7%.
Barclays also focused on governance challenges, emphasizing that social pressures could influence Milei’s ability to implement corrective policies and maintain support from middle-income sectors. The British entity concluded that achieving stabilization and a strong economic recovery are key for Milei to maintain support from middle-income sectors and develop a virtuous circle of reforms.