Argentinian President Javier Milei's government is poised to lay out its economic measures on Tuesday, putting the country's markets on alert.
Voters in the South American nation may have cause to worry following Milei's pledge for painful economic shock therapy to address the current crisis. However, markets are keen and hopeful that the far-right lawmaker will give the economy a "firm kick" following the reveal of his government's measures this week.
Argentina's Economic Situation
On Sunday, the newly elected president reaffirmed his plans for tough spending cuts to address Argentina's worst economic crisis in the past two decades. He also plans to bring down inflation which is now nearing 150% but warned that the situation will get worse before it gets any better.
In his maiden speech, Milei repeatedly said, "There is no money" and pledged to make tough decisions even if it meant causing pain to the country. He added that the challenge moving forward is "titanic."
Analysts argued that the president, who they said won over voters with a "chainsaw" economic plan to cut state spending and overturn a deep deficit, needs to follow through on his tough talk. In the past few weeks, Milei's election victory has buoyed stocks and bonds, as per Business World Online.
Consultancy EcoGo said that the greatest risk in the following days is that the signals are not strong enough. It added that these signals should include a firm fiscal kick as well as a clear signal of willingness to carry out structural reforms.
Milei and economy chief Luis Caputo are expected to unveil a package of economic measures early this week. This comes as investors are on the lookout for a devaluation of the peso, which is now held by currency controls, public spending cuts, and potential privatizations.
Economist Gustavo Ber said that it is going to be crucial for the new government to quickly revive confidence within the nation. He added that the administration needs social and legislative support due to the likely economic hurdles and inflation rising higher.
The official peso dipped in line with a controlled devaluation that was set in place several months ago. Furthermore, dollar bond prices inched lower as spreads tightened marginally, according to Reuters.
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Javier Milei's Economic Measures
Milei, who took office on Sunday, said in his first speech as president that there would be fiscal adjustment equivalent to 5% of GDP through cuts that would fall on "the state and not the private sector."
The minutes of the first cabinet meeting that were shared show some of the items that the team is looking at including the government payroll and revision of contracts from every ministry. It also includes direct contracts with universities.
The 53-year-old is known for his fiery, profanity-laden rhetoric along the campaign trail as well as his disdain for what he considered the mainstream "political caste." The economist has drawn comparisons to former United States President Donald Trump and he has been welcomed by far-right leaders worldwide.
Milei's eccentricity, brash words, and penchant for theatrics, including his brandishing of chainsaws along the campaign trail. Some have even nicknamed him "El Loco" which means the madman, said USA Today.
