Argentina’s newly elected president, Javier Milei, faces extreme challenges with highly uncertain outcomes. While Milei proposed strong measures during his campaign that could eventually address the stark imbalances that currently paralyze Argentina’s economic activity, distort relative prices, and reduce purchasing power, these measures would cause an abrupt and deep economic adjustment if enacted as described. This could collapse domestic demand and threaten financial stability.

The credit agency Moody’s Investors Service focused on the consensus necessary to carry out the proposed reforms and on governance. Jaime Reusche, Vice President – Senior Credit Officer de Moody’s Investors Service stated: “A Congress divided and social pressures will also influence the incoming president’s ability to implement corrective policies.”

JP Morgan also placed its magnifying glass on the risks of implementing the measures announced by Javier Milei during the campaign. In a report for its clients signed by economists Diego Pereira, Lucila Barbeito and Gorka Lalaguna, the US bank warned: “President-elect Milei offers a bold reform agenda but governance risks loom given the lack of party structure and also the distribution of power in Congress after the elections generals.”

Investment bank JP Morgan believes that for Milei to successfully implement his fiscal program, he should focus on quickly closing the fiscal gap in a sustainable manner and this should be the axis of any stabilization program. It is essential to generate credibility in future economic results. According to their analysis, Milei’s fiscal program would advocate for a strong adjustment of spending at both central and federal levels with an aim to eventually reduce tax burden in future years while recognizing political limitations. They forecast a considerable fiscal consolidation effort next year with a primary fiscal balance consistent with an overall result of -1.7%.