By Sandeep Wasnik,

Argentina’s economy has been on a rollercoaster in recent years. Persistent challenges, from hyperinflation to periodic recessions, have necessitated bold policy shifts. In 2025, government-led structural reforms and strict fiscal discipline aim to rein in inflation, boost growth, and restore investor confidence. Current forecasts anticipate a modest yet significant recovery with real GDP growing by approximately 5%, reflecting a return to stability after years of economic turbulence.

Real GDP and Inflation

Over the last five years, Argentina’s real GDP has undergone variations as a result of external disturbances and changes in domestic policies. Although inflation has traditionally diminished economic performance, current policy initiatives are expected to result in a rebound in 2025. Pre-election spending and currency collapse were the main causes of the 2023 hyperinflation high of 211.4%. Although structural limitations still exist, aggressive budgetary tightening has lowered 2025 predictions to 25.9%.

Middle Class: Erosion and Tentative Recovery

The middle class has diminished due to years of recession and inflation, but targeted salary adjustments and subsidies are intended to counteract this trend.

Dollar Inflation in Argentina

Decades of fiscal deficits, too much currency printing to fund government spending, and loss of public trust in the peso drive dollar inflation in Argentina caused by consistent peso depreciation and hyperinflation. Rising inflation, which reached 211.4% in 2023, eroded the value of the peso, driving people and businesses to use the US dollar as a hedge, therefore lowering consumption of the local currency. Currency controls and a fractured exchange rate system together with a parallel “blue dollar” market only worsen volatility, producing a spiral in which dollar dependence drives peso devaluation. Although monthly inflation has fallen to 2.2% in January 2025 under President Javier Milei’s most recent austerity measures, peso remains unsteady and dollarization trends continue because of sustained underlying economic vulnerability.

The peso collapsed to 360 ARS/USD after a 54% devaluation, triggering hyperinflation (211.4%) in 2023 and in 2024, Fiscal tightening and reduced deficits lowered inflation to 117.8%, with the exchange rate at 970 ARS/USD by year-end.

Foreign Direct Investment (FDI): Trends and Policies

Argentina’s Foreign Direct Investment (FDI) trends from 2019 to mid-2024 reflect volatility shaped by economic instability and external shocks. In 2019, FDI averaged USD 2,628M per quarter, peaking at USD 3,986M (Q3-2019) but marred by debt outflows (-USD 846M in Q4-2019). The 2020 pandemic triggered a collapse, with FDI plunging to -USD 23M (Q2-2020) due to debt withdrawals (-USD 857M). Recovery began in 2021–2023, driven by surging debt transactions (e.g., USD 4,524M in Q4-2023) and profit reinvestment (USD 1,992M in Q4-2023), pushing FDI to record highs (USD 7,284M in Q4-2023). However, 2024 saw a sharp reversal: FDI dropped 62% to USD 2,385M (Q2-2024) as debt inflows fell to USD 1,179M and profit reinvestment halved (USD 496M vs. USD 2,342M in Q1-2024).

Under President Javier Milei, Argentina introduced reforms to attract foreign investment, focusing on long-term stability and deregulation. The RIGI regime (July 2024) offers 30-year fiscal guarantees, tax cuts, and trade benefits for large projects (mining, energy, infrastructure). Key goals include easing currency controls, privatizing state firms, and boosting export sectors.

  1. RIGI Incentives: 30-year tax/customs stability for investments over $200M (lowered corporate tax from 35% to 25%).
  2. Sector Focus: Priority on mining (lithium, copper), energy (Vaca Muerta shale), and agribusiness.
  3. Currency Reforms: Partial lifting of capital controls (cepo) post-2025 elections to ease profit repatriation.
  4. Deregulation: Streamlined bureaucracy, labour reforms, and privatization of state-owned enterprises.
  5. Risks: High inflation (118%), political opposition, and lingering FX restrictions ($200/month purchase limits).

Argentina’s Government Efforts and Programs for 2025

In 2025, President Javier Milei’s team in Argentina focuses on reforms to boost international teamwork, cut red tape, and keep a tight budget. They’ve made money changes to lower inflation, which might fall to 25–30%, and put in place strict spending cuts to balance the books. The government aims to get smaller by cutting down on ministries and reducing public sector jobs by 10%. They’ve also made business rules simpler to attract money from other countries. On the social side, they’ve increased money for kids helping over four million children and put forward the Equality Before the Law Bill. This bill gets rid of non-binary identity recognition and removes femicide as a special legal term. Argentina is also trying to build stronger business ties with the US, and it is talking with the IMF to sort out its debt problems on the world stage. However, political controversy has arisen over President Milei’s endorsement of $Libra cryptocurrency, which collapsed, leading to investor losses and impeachment calls from opposition parties. These reforms and challenges define Argentina’s transformative path in 2025.

Conclusion

Argentina’s economy in 2025 is characterized by guarded optimism as the government takes decisive structural reforms to meet long-standing issues like hyperinflation, budget deficits, and economic volatility. With a real GDP growth of 5% expected and inflation reducing to 25.9%, the emphasis is placed on fiscal discipline, deregulation, and foreign investment attraction through schemes like the RIGI regime. Yet, threats persist, such as political resistance, residual currency controls, and social unrest. Although reforms will stabilize the economy and restore investor confidence, the success of the measures will rely on continued policy discipline and the state of global economic conditions. Argentina’s road to recovery is promising but beset with obstacles.

The author is Latin America Expert and CEO of Grupo 108

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