Twenty-eight point two. That is Argentina’s poverty rate in the second half of 2025, compared to 52.9% a year earlier. The figure hits like a statistical slap: in eighteen months, Argentina has reversed a trajectory that development economists generally consider incompressible over less than a decade. The IMF made no secret of its satisfaction in early 2026, calling the macroeconomic stabilization one of the fastest in recent history. And yet, that same month, inflation rose from 31% to 33.1% annually, and the U.S. Treasury had to pick up the phone to help Buenos Aires defend its peso on the eve of midterm elections.
This is not a paradox. This is shock therapy halfway through.
The question about Argentina is not whether Javier Milei has succeeded or failed. It is to understand what happens, mechanically, when you apply a budget adjustment of rare brutality to an economy structurally deformed by decades of excessive public spending. What happens is that indicators diverge. Some improve very quickly. Others resist. And the dispersion of inflation forecasts among serious economists — between 25 and 30.5% for the IMF according to its different publications, 22% for BBVA, and a significantly elevated estimate for the OECD — says less about the quality of their work than about the profound uncertainty of the situation itself.
The Essentials
- Argentine GDP grew by 2.3% in the first quarter of 2026, after a severe recession in 2024. The IMF projects 4% growth for 2026-2027.
- Poverty fell to 28.2% in the second half of 2025, versus 52.9% a year earlier, according to INDEC (Argentine National Institute of Statistics).
- Inflation slightly rebounded to 33.1% in February 2026 after decelerating to 31%, and forecasts for the end of 2026 diverge sharply: between 25 and 30.5% according to different IMF publications (Article IV: ~25%; WEO April 2026: 30.5%), 22% for BBVA, and a significantly elevated estimate according to the OECD.
- U.S. Treasury support to defend the peso before 2025 midterms raises questions about the sustainability of exchange rate anchors without domestic political backing.
What 28% Poverty Really Means
The decline in the poverty rate is real. But it deserves to be broken down, because its interpretation conditions everything else in the debate.
Extreme poverty had exploded in late 2023 and early 2024 due to the shock of adjustment itself. The liberation of the exchange rate, the elimination of energy subsidies, and the brutal freeze on social spending had combined their effects to plunge Argentine households’ purchasing power within weeks. The poverty rate had reached 52.9% in mid-2024. The decline to 28.2% eighteen months later is explained in part by this phenomenon: we are returning from an artificial peak created by the shock itself, not just from structural poverty.
That is not to say the figure is meaningless. The return below 30% is real, measurable, and translates into concretely improved living conditions for millions of people. Inflation, even at 33% annually, is far below the levels recorded in early 2024, when annual inflation was between 250 and 290% — a level that corresponds to November 2023 for the sometimes-cited figure of 160%, not early 2024. Real wages, after plunging violently, have begun to recover. The labor market absorbed the shock without an explosion in formal unemployment, which was far from guaranteed.
What is harder to interpret is the question of sustainability. The decline in poverty occurred primarily through disinflation, not through a structural increase in real wages. When inflation stabilizes at a still-elevated level, or even rises slightly again, this recovery mechanism fades. This is exactly what the early 2026 figures suggest.
Disinflation Running Out of Steam
Milei’s Argentina had accomplished something many judged impossible in 2023: breaking a hyperinflation dynamic without price controls and without monetary printing. The mechanism was simple to describe, brutal to execute. Primary budget surplus, end of automatic spending indexation, peso anchored to a 1% monthly crawling peg. The result: inflation went from levels exceeding 250% annually in early 2024 to around 31% in mid-2025.
Then it stabilized. And in early 2026, it was rising slightly again, to 33.1%.
The phenomenon has a relatively consensual technical explanation among economists. The rapid adjustment of administered prices (energy, transport, public services) generated an initial inflationary impulse, then dissolved into statistics when the base effect became favorable. Now that this effect is exhausted, what remains is residual inflation linked to expectations, wage negotiations, and non-tradable service prices. And that inflation is far harder to reduce than monetary inflation.
This is where economists diverge. The IMF, which granted Argentina a $20 billion program in April 2025 and whose institutional credibility is partially engaged in the program’s success, projects inflation of between ~25% (Article IV, May 2026) and 30.5% (WEO April 2026) by year-end 2026. BBVA, more cautious, projects 22%. The OECD, for its part, retains a significantly higher estimate — which is to say that disinflation is essentially finished.
The dispersion is itself informative. When several serious institutions project results as different as these over a twelve-month horizon, it is not that their models are bad. It is that the key variables of the problem — credibility of the exchange rate regime, resistance of wage expectations, behavior of elected officials under electoral pressure — are not econometrically treatable. They depend on political decisions.
The Peso, the Dollar, and Washington
The episode that most intrigued outside observers in fall 2025 was U.S. Treasury support to defend the peso before Argentine midterms. Details remain partially opaque, but the general pattern is known: facing speculative pressure on the currency, Argentina benefited from a swap line or coordinated support from Washington, in a geopolitical context where Buenos Aires’ alignment with Washington had become a strategic fact.
The point is not to denounce the intervention. Liquidity support during electoral periods is common, and Washington has legitimate interests in Argentine stability. The point is methodological: the solidity of Argentina’s exchange rate regime cannot be assessed solely on the basis of its internal fundamentals if its defense depends partly on discretionary American support. That support may last — or it may not be renewed in another geopolitical context.
This is one reason why economists who acknowledge Argentina’s macroeconomic progress remain cautious about its durability. An exchange rate regime becomes credible only when it survives shocks without external support. Argentina has not yet passed that test.
What Growth Conceals About Public Services
Argentine GDP rebounded by 2.3% in the first quarter of 2026, and the IMF projects 4% for all of 2026-2027. These figures are real. But their composition deserves attention.
The recovery is driven by agribusiness, mining, and energy — tradable sectors exposed to world prices and not major consumers of domestic public spending. The Vaca Muerta sector, the shale gas and oil field in Patagonia, produces considerable revenue effects on Argentine current accounts. Natural resource rent economy, in other words, is driving growth while the rest of the economy is still digesting the shock.
What is progressing more slowly, or even declining, is investment in public services. Milei’s policy has involved massive and rapid cuts to education, health, and infrastructure budgets. These cuts made it possible to generate the primary budget surplus at the heart of the program — Argentina posted a surplus of 1.7% of GDP in 2024, for the first time in many years. But they have also degraded services whose deterioration takes time to appear in statistics.
The issue is not purely Argentine. Here we find a tension that structures all debates on shock therapies since the 1990s: macroeconomic gains (disinflation, budget surplus, return of investors) are relatively rapid and measurable. Costs to human capital and infrastructure are diffuse, slow to emerge, and difficult to causally attribute to the policy that engendered them. Argentina’s risk between now and 2027-2028 is not necessarily another financial crisis. It is growth that runs up against its own bottlenecks in human capital and infrastructure.
There is something analogous in the way emerging economies that successfully managed their industrial transition have systematically combined fiscal discipline and targeted public investment. The Korean model is the most documented illustration: macroeconomic rigor never meant abandoning public investment in education and future industries. Argentina is making the opposite bet.
What Milei Did That His Predecessors Could Not
The analysis would be incomplete if it stopped at the risks. There are things the Milei government has actually accomplished, and it is useful to name them precisely.
Argentina had a chronic budget credibility problem since the 1970s. Structural deficits were financed by monetary creation, which sustained endemic inflation that systematically eroded the real incomes of the poorest. Previous governments’ stabilization attempts — whether the Cavallo plan in the 1990s or Macri’s partial adjustments in 2018-2019 — had all foundered on the political inability to maintain the budget surplus under electoral pressure.
The current government has maintained discipline. The primary budget surplus of 2024 is the first in years, and it was maintained despite recession and social pressure. This is a real behavioral break, not rhetorical. The open question is whether this break is institutional — that is, anchored in rules, mechanisms, political coalitions that would make it difficult to undo — or whether it depends on the personality and popularity of the current leader.
The answer to this question conditions everything else. A macroeconomic stabilization that rests on the continuity of one man and an electoral coalition remains fragile, regardless of the quality of immediate results. A stabilization that creates autonomous budget control mechanisms, spending rules inscribed in law, truly independent central banks, has a very different lifespan.
Milei has so far prioritized speed over institutionalization. The debate on dollarization — suspended but not abandoned — illustrates this tension: dollarizing would eliminate monetary risk definitively, but would require a level of reserves Argentina has not yet reconstituted. The alternative, maintaining the crawling peg and counting on fiscal discipline, is effective as long as it is believed — and it is believed only as long as it is maintained.
The Two Symmetrical Traps of Debate
Public debate on Argentina has been, for the past two years, particularly unhelpful. On one side, admirers of Milei who see in the poverty decline confirmation of an economic theory and who ignore the fragility of the mechanisms. On the other, critics who see in growth figures only the statistics of a neoliberal regime and who ignore that fifty years of unfunded public spending did as much damage.
Both of these camps commit the same error: they seek a verdict where there is none yet. Argentina in 2026 is a country midway through its crossing. It has avoided the scenario of durable hyperinflation. It has not yet proven that it can escape residual inflation, reconstitute its reserves, maintain fiscal discipline without external support, and generate growth that touches services rather than only natural rents.
The dispersion of inflation forecasts among the IMF, BBVA, and the OECD is not a methodological problem. It is an honest epistemic signal: nobody knows what will happen, because what will happen depends on political choices that have not yet been made. Will the Argentine government maintain its surplus if the 2025 midterms have weakened its majority? Will Washington remain a stable support for the peso if geopolitics evolves? Will unions continue to accept wage increases below inflation?
These questions have no economic answer. They have a political answer.
What 2027 Will Really Tell
The true Argentine test is not 2026. It is 2027-2028, when base effects will be exhausted, when the U.S. Federal Reserve will have decided whether or not to ease monetary conditions (which directly affects capital flows to emerging markets), and when the Argentine government will have to manage a presidential election.
If inflation continues to fall toward 15-20% by year-end 2026, if reserves continue to reconstitute, and if growth diversifies beyond primary sectors, stabilization will be proven. If inflation stagnates between 25 and 35%, if reserves plateau, and if growth remains concentrated on Vaca Muerta and agribusiness, the country will face a difficult choice: deepen the program or adjust it under electoral pressure.
Both scenarios are plausible. Neither is inevitable. This is not a way of saying nothing — it is exactly what the dispersion of econometric forecasts means: the outcome depends on decisions that have not yet been made, in a country that has proven it could change course rapidly in both directions.
What the Argentine trajectory already teaches, however, is useful to retain for other emerging economies looking toward Buenos Aires: shock therapy can indeed break an inflationary spiral in two years. The social cost of the adjustment phase is severe but temporary if the plan is maintained. And the truly difficult part is not the initial shock — it is what comes after, when easy gains are exhausted and long-term structural reforms (institutions, public investment, human capital) must take over.
This is precisely where Milei’s Argentina will be decided.
Sources
- IMF — Article IV Argentina 2026
- INDEC (National Institute of Statistics and Census of Argentina) — Permanent Household Survey, second half of 2025
- OECD — Economic Outlook, May 2026 (report without stable available link)
- BBVA Research — Macroeconomic Forecasts Argentina 2026
- Buenos Aires Herald — coverage of IMF program and INDEC data, 2025-2026
- INDEC – EPH Report on Poverty S2 2025 (official primary source)
- IMF – Official Argentina Page (imf.org)
- Argentina.gob.ar – Fiscal Result 2024
- Congressional Research Service – U.S. Financial Support to Argentina
- BBVA Research – National Inflation Argentina, February 2026
- Buenos Aires Herald – GDP T1 2026
- Ministerio de Economía Argentina / Chequeado – Fiscal Surplus 2024
- France Diplomatie – Presentation of Argentina (IMF program 2025)