Goldman Sachs Cuts Argentina's Growth Forecast and Focuses on Elections

Goldman Sachs has reduced its growth forecast for Argentina in 2026 and anticipates a possible contraction in activity during the second quarter. Additionally, it noted that economic performance will begin to be evaluated by the market based on the 2027 presidential elections.

The entity revised its estimate from 3% to 2.7% for this year after the indicators for April and May fell below expectations. The revision came after the Gross Domestic Product (GDP) grew by 0.7% seasonally adjusted in the first three months.

According to the report, this improvement was supported by the statistical carryover from late 2025 and the performance in March, which compensated for the weaker data in January and February. However, the momentum lost strength during the following two months.

Despite the cut, the bank considered that the Argentine economy is still "expanding at a moderate pace" and maintained a favorable assessment of some aspects of the economic program.

In this regard, it highlighted the government's commitment to fiscal balance, the accumulation of reserves, and the improvement of the trade balance. According to its calculations, the Central Bank purchased about $13 billion so far this year, and net reserves increased by around $6.6 billion.

The accumulated trade surplus over 12 months reached the equivalent of 3.2% of GDP, with the energy sector responsible for nearly half of the positive result.

Goldman Sachs also valued the disinflation process: after the 1.9% recorded in June, it projected that inflation will continue to decelerate during the second half and close 2026 near 29%.

In its overall assessment, the entity stated that Argentina continues to be "on the right track in terms of macroeconomic policy", although it warned that political and social challenges persist.

"The margin for error is narrow," stated the bank, which anticipated greater investor attention on the possibilities of Javier Milei winning re-election in October 2027.

For Goldman Sachs, a firmer recovery of activity, improvement in real wages, and the continuation of disinflation could strengthen the President's electoral prospects.

Despite the upgrade from Moody's, the country risk rose by 4.3% this week and closed at 437 basis points, after reaching 445 during the session. Thus, it became the highest in Latin America, excluding Venezuela.

The deterioration was partly due to the international context, marked by the war in the Middle East, rising oil prices, and uncertainty regarding the upcoming decisions of the Federal Reserve. However, Argentine assets reacted more intensely than those of other emerging markets.

Locally, the city closely monitors the decline in activity, the drop in consumer confidence, and the weakness of private investment. This is compounded by the electoral risk of 2027, given the doubts about the continuity of the economic program and the willingness of a future administration to pay.

The market estimates that the indicator could remain between 425 and 500 basis points in a base scenario. An improvement in the international climate and greater legislative advances could bring it down to the range of 350 to 425 points, while a drop below that range would require a clearly more favorable scenario.

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