Market analysts and financial experts are in broad agreement that the Argentine economy will experience significantly lower growth than originally anticipated for the year 2026. A growing consensus among prominent economists even suggests that the country is already slipping into an economic recession, driven by persistent domestic structural headwinds, declining domestic consumption, and the uneven performance of key productive sectors.
These sobering conclusions emerge directly from the latest September Market Expectations Survey, widely known by its Spanish acronym REM. This critical monthly poll is carried out by the Central Bank of Argentina and serves as a barometer for the nation’s macroeconomic trajectory. The comprehensive analysis systematically gathers and synthesizes the economic forecasts made by more than 40 leading participants, comprising local and international consulting firms, specialized research centers, and major financial entities. Together, these forecasters evaluate the main variables shaping the local economy, offering a detailed snapshot of financial expectations.
The latest iteration of the report paints a picture of deteriorating economic prospects, particularly for the third quarter and the remainder of the year. In addition to a downward revision of overall economic growth, the surveyed analysts project a renewed upward tick in both inflation and unemployment rates. Interestingly, within a landscape characterized by widespread negative revisions, the sole macroeconomic variable that analysts believe will remain relatively stable is the United States dollar-to-peso exchange rate, which continues to follow a more predictable trajectory than previously feared.
Is the Economy in a Recession?
The question of whether Argentina has entered a recession has taken center stage in economic discussions following the release of the latest REM report. The survey data estimates that the seasonally adjusted gross domestic product (GDP) contracted by a notable 1% during the third quarter of 2026. This represents a significant 2.1 percentage point downward correction compared to the previous month’s forecasts, which had optimistically projected a 1.1% growth rate for the same period.
This contraction carries profound technical implications for the broader economy. Given that the second quarter of the year already registered a 0.6% seasonally adjusted economic contraction, the lack of growth—compounded by a quarterly decline—during the third quarter means the economy has effectively entered what economists formally define as a "technical recession." Two consecutive quarters of negative or zero growth mark the threshold of this economic milestone, dashing early hopes of an uninterrupted post-stabilization recovery under the current administration.
Despite the gloomy third-quarter results, a cautious recovery is still anticipated for the final stretch of the year. Economists project a rebound in the last quarter of the year, with an estimated 1.8% growth rate. This represents a modest 0.5 percentage point increase compared to the previous survey, which had pegged fourth-quarter growth at 1.3%. However, this anticipated year-end bounce will not be enough to reverse the broader annual slowdown.
The projected fourth-quarter uptick ultimately failed to prevent analysts from slashing their growth expectations for the entirety of 2026. In the August REM survey, the estimated annual growth rate was pegged at a respectable 2.1% year-on-year. The latest update curtailed that figure down to 1.5%, reflecting mounting pessimism regarding the strength of the domestic market.
A primary driver behind this persistent downward correction is the deeply sluggish performance of the traditional real economy sectors. Critical pillars of domestic economic activity, including industry, commerce, and construction, continue to suffer from weak internal demand and high financing costs. Crucially, the severe contraction and stagnation experienced by these domestic-facing sectors are not being adequately offset by the ongoing export boom seen in primary industries such as minerals, energy, and agriculture, which tend to generate high foreign currency revenues but create fewer domestic jobs in the short term.
Among the domestic sectors bearing the brunt of the downturn, manufacturing stands out as one of the hardest hit. The industrial sector has endured wild fluctuations over the past year, reflecting the immense structural adjustments taking place across the country. Following a steep 5% month-on-month seasonally adjusted drop in July—which marked the largest single-month decline recorded since March 2025—a subsequent report released on Wednesday revealed a modest 1.9% rise in industrial activity for August.
While any positive monthly figure is generally welcomed by sector leaders, this particular improvement falls woefully short of what is needed to recover the severe losses incurred during the previous month. When measured against the baseline figures of December 2025, manufacturing output remains down by 1.6%. More broadly, industrial production has accumulated a decline of more than 7%—resting at an index level of 123.5—since the inauguration and subsequent policy implementation of President Javier Milei, underscoring the deep structural contraction that the industrial sector continues to navigate.
Exchange Rate, Unemployment, and Inflation
Beyond the aggregate figures of GDP growth and industrial output, the labor market expectations compiled in the REM survey also worsened notably compared to the previous measurement period. Analysts surveyed by the Central Bank now estimate that the national unemployment rate will climb to 7.5% during the third quarter of 2026. This represents a 0.2 percentage point increase over the predictions made in the preceding month’s survey. The outlook for the labor market deteriorates slightly further as the year closes, with the projected unemployment rate for the fourth quarter revised upward to 7.7%, reflecting the delayed impact of corporate restructuring and weak domestic demand on hiring practices.
Inflationary pressures also continue to present a persistent challenge to policymakers and households alike, defying some of the more optimistic targets previously floated by financial authorities. Analysts forecast a monthly inflation rate of 1.9% for September, which marks an acceleration compared to the previous month’s projection of 1.8%. Looking at the broader horizon, forecasters project that the annual inflation figure will close out the year at approximately 30%. This represents an upward adjustment from the August projections, which had anticipated annual inflation to conclude the year at 27.7%, demonstrating that price stabilization is proving to be a stubborn and gradual process.
Amid the general downward revisions affecting economic growth, employment, and inflation, exchange rate projections stood out as the sole macroeconomic indicator that showed an improvement and greater stability compared to previous estimates. Market participants appear increasingly confident in the government’s foreign exchange management and the anchoring effect of current monetary policies.
According to the survey data, the official exchange rate for the end of October is expected to conclude at approximately 1,545 Argentine pesos per U.S. dollar, sitting about 20 pesos below the projections recorded in the previous survey. Looking further ahead to the close of the calendar year, the exchange rate for December is projected to reach 1,614 pesos per U.S. dollar. This anticipated year-end level translates to an estimated 11.5% year-on-year depreciation rate, signaling a more contained and predictable trajectory for the local currency against the greenback than many market observers had initially feared earlier in the fiscal cycle.
