• Javier Milei became Argentina's president a year ago, partly on a pledge to slash the state.
• Elon Musk and Vivek Ramaswamy, co-heads of DOGE, have expressed admiration for Milei's policies.
• While his government brought inflation down, his approaches have also triggered a recession.

When Javier Milei took office on December 10, 2023, the firebrand Argentine president inherited an economy in meltdown. Milei promised to take a "chainsaw" to the state.

Since then, he has presided over sweeping spending cuts, fired tens of thousands of public employees, shut down half the country's 18 ministries, and devalued the peso against the dollar by over 50%. He cut state spending by an estimated 31% in his first 10 months alone.

The measures caught the attention of Elon Musk and Vivek Ramaswamy, the men now charged with a similar task under President-elect Donald Trump.

Last month, Musk said Argentina had made "impressive progress,'" while Ramaswamy said that the US needed "Milei-style cuts on steroids."

Falling inflation

A year into Milei's term in office, BI took a look at the figures.

When Milei took over in December 2023, Argentina's inflation stood at 25.5%, while economic activity had fallen 4.5% year over year.

Argentina's inflation rate dropped to 2.7% this October — the lowest level in three years, according to the predicting market website Kalshi.

Ignacio Labaqui, a senior analyst at Medley Global Advisors, a leading macro policy research service, called this a "success" for Milei.

He said that Milei "managed to bring inflation down faster than expected despite starting his term with a 100% increase in the exchange rate and hiking longtime frozen utilities' tariffs — two measures that have an inflationary impact."

However, Facundo Nejamkis, director of Opina Argentina, a political consultancy firm, told Reuters that Milei's cuts have ignited a "major" recession.

Unemployment up

According to BBVA projections, Argentina's GDP contracted by 3.4% in the first half of 2024, and it is expected to decline by 4% for the full year.

The country's unemployment rate also rose to 7.6% in Q2, up from 6.2% in the same period last year, according to Argentina's statistics agency.

Maria Victoria Murillo, director of the Institute of Latin American Studies at Columbia University, told BI last month that the "deep" recession, while "very painful," has been accepted by Argentinians because inflation was "terrible" and people "do not want to go back."

Meanwhile, according to Argentina's statistics agency, the country's poverty rate rose to 52.9% in the first half of 2024, up from 41.7% in the second half of 2023.

This was the highest rate in 30 years, per a research team at the Observatory of the Argentine Social Debt, which keeps track of key economic indicators.

While acknowledging declining inflation, it said growing poverty was a result of Milei's "shock" economic plan and structural issues, including the devaluation of the peso.

Falling inflation "does not yet translate into a greater capacity for household consumption," it said.

Fiscal balance

There are, however, some signs of recovery.

In the first five months of 2024, Argentina's government achieved a primary fiscal surplus of 1.1% of GDP — its first in 12 years.

This is Milei's "most remarkable achievement," said Labaqui of Medley Global Advisors, who said the fiscal surplus, together with the exchange rate anchor, brought inflation down faster than expected.

BBVA Research, for its part, said that it expects Argentina's GDP to rebound strongly next year, from a 4% deficit in 2024 to 6% in 2025, driven by investments, exports, and private consumption.

Juan Cruz Díaz, managing director at Cefeidas Group, an international advisory firm, told BI that "one year later, it can be argued that the economic landscape has certainly improved, although there is still a long way to go."

He said that Argentina is still expected to end 2024 with an accumulated inflation of 120%, one of the highest in the world, but a sharp decline from 2023's 211%.

"In addition, Milei has promoted a regime to attract large foreign investments in certain sectors of the economy, with some initiatives already underway," he said.

Cruz Díaz added that one of the surprising aspects of the last year has been Milei's ability to "keep his public image relatively stable throughout the year, despite having implemented deep cuts in public spending, along with other measures generally considered unpopular and politically costly, such as the elimination of subsidies for energy and other essential services."

This is something that could be of particular interest to Musk and Ramaswamy, as they look at sweeping federal budget cuts in the US.

Labaqui, for his part, said keeping Argentina's current trajectory will depend on whether Milei's party performs "strongly" in next year's legislative elections.

"Inflation certainly is falling at a faster-than-anticipated pace," he said, "and there is an incipient economic rebound, but there is still a lot to do to bring the economy back on track."

• Small-business optimism may rise after Trump's election win, potentially boosting hiring intentions.
• Optimism surged post-2016 election, with small businesses planning to hire more employees.
• Improved labor market conditions could enhance consumer sentiment and boost wages.

Welcome to the vibe-spansion.

Yes, that's a portmanteau of vibes and expansion, and it's the upbeat version of its better-known cousin, the vibecession.

The term vibecession, a play on the word recession coined by content creator Kyla Scanlon, has been used to describe how people have felt about the economy for the last few years. While the National Bureau of Economic Research hasn't declared an official recession during that time, as there's been no significant decline in employment and consumer spending, inflation and a floundering job market have left consumers feeling downcast about the economy.

That could be about to shift.

That's because the optimism of small-business owners, and their intentions to hire more employees, are probably set to rise after Donald Trump's win in the presidential election earlier this month, with the president-elect promising to cut taxes and regulations.

"Small business owners lean Republican," said Oliver Allen, a senior US economist at Pantheon Macroeconomics, in a November 12 note.

Numbers from the National Federation of Independent Businesses' November survey aren't in yet, but the 2016 election period saw a substantial shift in small-business optimism. Even with higher interest rates and a slightly slowing economy, one would expect some sort of positive jolt to outlooks, experts say.

"After Donald Trump was elected the 45th President in November 2016, the National Federation of Independent Businesses (NFIB) small business optimism index skyrocketed. It was truly a reflection of 'animal spirits' coming to life and this behavior is likely to be repeated," Goldman Sachs' Chief US Equity Strategist David Kostin wrote in a November 18 client note. "We expect an improving small business operating environment will boost the sentiment and spending of SMBs in 2025 and lift the earnings and valuation of stocks with revenues tied to that spending."

Admir Kolaj, an economist at TD Economics, agrees.

"Although the economy is on different footing now and facing a different set of challenges, we anticipate we're likely to see an improved mood among small business owners to cap off the year," he said in a November 12 note.

NFIB data shows that optimism bleeds through to concrete actions. Hiring intentions also jumped after the 2016 election, and they have tracked closely with actual job openings.

Of course, job openings had already been on the rise in the years leading up to 2016, while they are falling today. But the expected jump in optimism, and the presumptive knock-on effect in hiring intentions, could turn that around.

With inflation having cooled off and interest rates starting to fall, more job opportunities flooding the market could be what consumers need to feel better about the economy.

When there are more jobs available, the labor market becomes more employee-friendly, and workers are able to command higher wages. Higher pay could help consumers feel like they're finally able to get ahead, assuming it doesn't fuel higher inflation again with many of the pandemic supply chain hurdles now out of the way.

Workers will also feel less trapped in their current jobs when openings are more abundant, according to Daniel Zhao, lead economist at Glassdoor. About two-thirds of workers feel "stuck," he said. With openings falling since 2022, the number of quits has dropped dramatically.

"Once the job market heats up again, that will open a relief valve to release the bottled up pressure, by giving workers the option to quit in favor of better options on the market," Zhao wrote in a November 19 report. "For the time being, employers may be benefiting from unusually low turnover rates, but they shouldn't be complacent—a wave of revenge quitting is on the horizon."

The turnaround may not be easy. Unemployment has been trending upward, and the tough credit environment for small businesses may mean that continues. Uncertainty stemming from Trump's tariff proposals could also hamper hiring and business investment.

But the idea that a rosier outlook from small-business owners could boost labor conditions is plausible. The past data is there to support it. Whether the post-election bump in optimism will be enough to spark a hiring spree and improve consumers' attitudes this time around will become evident in the months ahead.

The vibe-spansion could be upon us.