Milei denies recession as J.P. Morgan forecasts Q3 contraction

President Javier Milei has rejected suggestions that Argentina is heading into a recession, despite a series of recent economic indicators pointing to a sharp slowdown in activity.

Speaking to TV outlet LN+ on Sunday night, the libertarian leader questioned the reliability of seasonally adjusted data, arguing that Argentina’s economic transformation is distorting the indicators.

“I can’t believe the intellectual dishonesty of economists,” Milei — himself an economist —  said, accusing some of his colleagues of highlighting negative figures because of “the hatred they have for this government.”

Pressed about the 2.9% month-on-month fall in economic activity recorded in July, a drop of 1.4% year-on-year, Milei acknowledged that the economy is losing momentum, but rejected describing the change as a recession. 

“What we have is a slowdown in the pace of expansion,” he said.

Defense of the economic plan Milei said the government pays greater attention to the trend-cycle indicator than to the month-on-month numbers.

“If an economy undergoes many structural changes, the seasonally adjusted figures measure poorly,” he explained.

“We focus on the trend-cycle indicator because the economy is undergoing many structural changes. That’s why they are producing all kinds of nonsense,” Milei added.

The president said he expected his administration to achieve “four consecutive years of growth” and argued that Argentina is currently at maximum levels for consumption, exports and gross domestic product (GDP).

He also played down concerns about the rise in unemployment, which reached 7.9% in the second quarter. Milei said the figure was “not substantially different from 2023” and noted that the country’s historical average is around 9.8%.

“We don’t have a problem,” he assured.

The president attributed the increase in unemployment to a “reallocation of resources” and to more people entering the labor market. 

He also said his administration had created more than 500,000 jobs, or 600,000 when public-sector job losses are excluded.

Rise in country risk The president also downplayed the impact of the rise in country risk, which rose above 600 basis points during the past week — a jump of 50% since July — and dismissed any risk of default. 

The increase matters for the government because a higher country risk premium means investors demand higher returns to buy Argentine debt. That raises the cost of a potential return to international markets and also affects provinces and companies seeking dollar financing.

The increase also complicates the government’s 2027 financing plans. Argentina’s estimated financing needs for that year are around US$24.9 billion, while the deterioration in bond prices has increased the cost of issuing debt.

A higher risk premium also raises financing costs for long-term investment projects such as those linked to Vaca Muerta, while the government’s slower accumulation of reserves has raised questions about its ability to meet future external commitments.

However, during the interview Milei sought to reassure markets, saying the government had secured funding through the end of 2027.

“We have the public sector’s financing secured until the end of next year. What is the probability of default that the market assigns to this government? Zero. That didn’t happen in Argentina before. It’s not a minor issue,” he said.

J.P. Morgan anticipates recession and cuts growth Milei’s optimistic views — which echo his recent speeches in New York, where he attended the United Nations’ General Assembly and spoke before potential investors — come as the U.S.’s biggest bank, J.P. Morgan, cut its forecast for Argentina’s economic growth in 2026 from 2.7% to 1.5% after July’s activity figures came in substantially weaker than expected.

It described July’s 2.9% month-on-month contraction as Argentina’s worst monthly performance since the April 2020 lockdown. Excluding that period, the global financial shock of late 2008 and the financial stress of 2018-2019, J.P. Morgan said no month since 2004 had recorded a larger decline.

The bank now anticipates a 4% annualized contraction in the third quarter. The projection follows a 0.6% seasonally adjusted contraction in GDP during the second quarter.

If activity contracts again between July and September, Argentina would have two consecutive quarters of contraction, the usual definition of a technical recession.