Economic activity is beginning to show signs that a recession is on its way in Argentina – the likelihood of one arriving is 98.6 percent, according to a new report from the finance research centre of the Universidad Torcuato Di Tella (UTDT).
The report is based on August data and indicates a leap of 41 percentage points compared to July, when the expectation of a recession was 56.1 percent.
The UTDT centre report shows that in August., its advanced indicator of economic activity experienced a 4.7 percent fall from the previous month, whereas the trend series-cycle dropped by 1.2 percent.
In the eighth month of the year, the effect of the rise in companies’ financing rates was felt. A striking piece of information is the 3.9-percent fall of business loans, according to the Central Bank – a clear reflection of the higher cost of money.
According to Pablo Blanco, CFO of Alprestamo financial marketplace, the contraction is directly in keeping with the rise of interest rates, making short-term financing more expensive for companies. “This effect is usually first seen in business loans, where companies adjust their demand compared to the higher cost,” he stated.
Experts observe that the third quarter shows a significant fall in industrial activity. Industrial production data for July 2025 confirms the deterioration of the manufacturing sector. The index overall saw a 1.1-percent annual contraction, according to the INDEC national statistics bureau, marking the first year-on-year fall of the year.
This is explained partly by the exhaustion of the favourable “comparison basis” effect held by positive values in the first half of the year – the monthly variation reinforces this, with a 2.3-percent fall from June, which worsened the contraction trend which had already occurred the previous month (down 1.6 percent).
“This dynamic confirms that the brief recovery process of industry towards the end of 2024 and early this year has ended before expected, with the complexities it carries in regions where the sector has a high share, such as Buenos Aires Province,” said Haroldo Montagú, chief economist of Vectorial.
Growth projections
The Milei government has projected growth of 5.4 percent for this year in its 2026 Budget bill – above the 4.7 percent calculated by JP Morgan after the cooling shown by economic activity after the leap of interest rates and stagnant real salaries. Even if the 5.4 percent mark is hit, it would mean that Argentina’s economy cooled in the second half – in the first half it experienced 6.2 percent growth year on year.
Within the next few months, analysts say it will be possible to observe falls in monthly variations. In the middle of next month’s elections, the economy might show greater signs of stagnation.
In turn, the stagnation looking forward damages sectors which had been recovering, and which are still not at levels seen prior to the inauguration of President Javier Milei in December 2023. One such example is construction, which is still below levels of November 2023. The Synthetic Construction Activity Index (ISAC, in Spanish) grew by 1.4 percent in July, while the Construya Index rose by 0.1 percent; even though they stay in positive ground, they show a clear slowdown from the peaks reached during the first half of the year.
“The merger towards more modest growth rates suggests that the sector will not be able to stay outside the recessive pressures affecting the entire economic activity, which will hardly be resumed at pre-Milei activity levels,” said Vectorial. “This also has an effect on the visible fall in jobs in the sector. If we compare the number of workers in June 2025 from the same month in 2023, the drop was by 17 percent. This means 78,791 fewer jobs, which shows a resounding difficulty for the sector when it comes to reinstating workers, even having shown some partial recovery in the first half.”
Both industry and construction are the biggest employers in terms of intensive manpower – and the ones where stoppages affect unemployment most.
Eyes are also being cast towards trade. Argentina’s negative trade balance was tractioned not only by capital goods imports, but also by consumer products imports, which affect nationwide production and by extension the economic activity of certain sectors.
Argentina’s 2026 Budget is expected to show a deficit of US$ 2.44 billion for foreign trade this year and for the figure to rise to a red number of US$ 5.75 billion by next year.
Industrial manufactured goods account for a quarter of all our exports and agriculture manufactured goods account for 35 percent; in all, industry accounts for 60 percent of nationwide exports. The more affected industry remains, the fewer exports there will be.
The latest report by the study centre of the Argentine Industrial Union (UIA in Spanish) revealed that 30 percent of business leaders recorded falls in exports.
However, the industrial sector is also one of the hardest hit by the importing boom, a central factor for its deterioration. During the first half, foreign purchases of consumer goods amounted to US$ 5.26 billion – 32 percent more than in 2023. Over the same period, industrial production fell by 10 percent.
Imports are expected to total US$105.76 billion, which means that from August to December they will be US$62.98 billion, since the first seven months of the year they amounted to US$62.98 billion. That is, they are expected to grow, not only in the second half of the year, but to go up in 2026 by 40 percent from 2025, according to the presented Budget.
In addition, the negative trade balance is expected to continue for at least three more years. In the Budget bill, exports for 2027 and 2028 are estimated to reach US$122.41 billion and US$ 31.5 billion, with imports at US$126.11 billion and US$138.55 billion respectively.
It is not until 2030 that energy exports are expected to amount to US$30 billion. In the meantime, industry, the sector with the biggest exports, is strongly affected by the government’s economic policy of trade openness, which has only made imports grow non-stop.
