Argentina's President Presents 2025 Budget, Vowing Austerity

Argentine President Javier Milei attends a session of the National Congress to present the annual budget in Buenos Aires, Argentina, 15 September 2024. EPA/Juan Ignacio Roncoroni
Argentine President Javier Milei attends a session of the National Congress to present the annual budget in Buenos Aires, Argentina, 15 September 2024. EPA/Juan Ignacio Roncoroni
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Argentina's President Presents 2025 Budget, Vowing Austerity

Argentine President Javier Milei attends a session of the National Congress to present the annual budget in Buenos Aires, Argentina, 15 September 2024. EPA/Juan Ignacio Roncoroni
Argentine President Javier Milei attends a session of the National Congress to present the annual budget in Buenos Aires, Argentina, 15 September 2024. EPA/Juan Ignacio Roncoroni

Libertarian President Javier Milei of Argentina presented the 2025 budget to Congress late Sunday, outlining policy priorities that reflected his key pledge to kill the country's chronic fiscal deficit and signaled a new phase of confrontation with lawmakers.
In an unprecedented move, Milei personally pitched the budget to Congress instead of his economy minister, lambasting Argentina's history of macroeconomic mismanagement and promising to veto anything that compromised his tough slog of tight fiscal policy, The Associated Press reported.
The president's budget proposal followed a week of political clashes in the legislature — where Milei controls less than 15% of the seats — over spending increases that the administration warns would derail its IMF-backed “zero deficit” budget. Opposition parties have sought to pass laws to raise salaries and pensions with inflation to help hard-hit Argentines cope with brutal austerity.
“The cornerstone of this budget is the first truth of macroeconomics, a truth that for many years has been neglected in Argentina: that of zero deficit,” Milei told lawmakers, facing a handful of empty seats as most of the hard-line opposition Peronist bloc, Unión por la Patria, skipped his address. “Managing means cleaning up the balance sheet, deactivating the debt bomb that we inherited.”
Milei's supporters interrupted his speech — packed with his usual libertarian talking points — with whoops and cheers.
It will fall to the opposition-dominated Congress, which controls the government’s purse strings, to approve the final budget. Milei’s political isolation makes matters fraught, setting up weeks of negotiations with political rivals who insist on concessions.
But Milei vowed that nothing would stop him from pressing on with austerity.
“The budget is a declaration of principles,” said Argentine economist Agustín Almada. “Even if there is no compromise from the opposition, Milei will continue pursuing this fiscal contraction.”
If the stroke of a veto pen failed to prevent powerful lawmakers from spending, Milei promised to find other ways to cut down the state.
“We will only discuss the increase in spending when it comes along with an explanation of what we’ll cut to compensate for it,” Milei said.
Over Milei’s past nine months in office, dramatic cuts to public spending — which he says are necessary to restore market confidence in a country ravaged by one of the world's highest annual inflation rates — have racked up a fiscal surplus (0.4% of gross domestic product), something unseen in nearly two decades.
The austerity has also caused deep economic pain in Argentina, with nearly 60% of Argentines now living in poverty, up from 44% in December, according to the Catholic University. Milei has largely balanced the budget by slashing financial transfers to provinces, removing energy and transport subsidies and holding wages and pensions steady despite inflation.
The fight over pensions reached a head last week, when Milei and his allies defeated a bill that would have boosted social security spending in Argentina, compromising the administration's fiscal discipline. The bill swept through both houses of Congress last month but opposition parties ultimately failed to obtain the two-thirds majority needed to override the president’s veto after government lobbying eroded support for the measure.
At news of the bill's rejection Thursday, outraged retirees — who have lost roughly half of their purchasing power due to inflation — poured into the streets of downtown Buenos Aires, where they faced off with riot police spraying tear gas and water canons.
Milei warned that his fiscal shock therapy was not going to be easy. But his administration is betting that the worst has passed. Although Argentina's annual inflation hovers around 237%, Milei has retained popular support by working to keep a lid on monthly inflation, which has dropped to 4% since its peak of 26% last December when he took office.
In an optimistic statement about the budget Sunday, the Finance Ministry said it expected Milei's proposal to result in an annual inflation rate of just 18% by the end of 2025 and yield a 5% economic growth rate. Argentina's economy contracted by more than 3% in the first half of 2024.
But much of Milei's future depends on Congress. The government's pension law victory last week proved short-lived, as lawmakers in the lower house also passed a bill increasing spending on public universities.
Milei has vowed to veto the bill.
Congress dealt Milei another blow last week when it rejected his plan to raise spending on the intelligence services by more than $100 million. Despite all the belt-tightening, Milei has committed to increasing defense spending from 0.5% of GDP to 2.1%, raising the hackles of some lawmakers as his cuts to health and education hit the populace.
Although Milei has repeatedly compromised to get his legislation through Congress, he took a strident tone in Sunday's speech, describing lawmakers as “miserable rats who bet against the country."
Some analysts warned that Milei's exercise in political messaging spelled trouble.
“The image of a half-empty chamber of deputies during the president’s speech is an indication that it will not be easy for the government to pass this budget,” said Marcelo J. García, Director for the Americas at the New York-based geopolitical risk consultancy Horizon Engage. “Again, Milei seems to be prioritizing confrontation over compromise.”



China’s October New Lending Tumbles More than Expected despite Policy Support

 A masked woman walks at a fashion boutique displaying posters to promote Singles' Day discounts at a shopping mall in Beijing, Monday, Nov. 11, 2024. (AP)
A masked woman walks at a fashion boutique displaying posters to promote Singles' Day discounts at a shopping mall in Beijing, Monday, Nov. 11, 2024. (AP)
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China’s October New Lending Tumbles More than Expected despite Policy Support

 A masked woman walks at a fashion boutique displaying posters to promote Singles' Day discounts at a shopping mall in Beijing, Monday, Nov. 11, 2024. (AP)
A masked woman walks at a fashion boutique displaying posters to promote Singles' Day discounts at a shopping mall in Beijing, Monday, Nov. 11, 2024. (AP)

New bank lending in China tumbled more than expected to a three-month low in October, as a ramp-up of policy stimulus to buttress a wavering economy failed to boost credit demand.

Chinese banks extended 500 billion yuan ($69.51 billion) in new yuan loans in October, down sharply from September and falling short of analysts' expectations, according to data released by the People's Bank of China (PBOC).

Economists polled by Reuters had predicted a fall in new yuan loans to 700 billion yuan last month from 1.59 trillion yuan the previous month and against 738.4 billion yuan a year earlier.

"Corporate financing demand remains weak due to poor profitability," said Luo Yunfeng, an economist at Huaxin Securities. "Credit demand may not pick up soon despite recent central bank policy measures."

The PBOC does not provide monthly breakdowns but Reuters calculated the October figures based on the bank's Jan-October data released on Monday, compared with the Jan-September figure.

The PBOC said new yuan loans totaled 16.52 trillion yuan for the first ten months of the year.

Household loans, including mortgages, dropped to 160 billion yuan in October from 500 billion yuan in September, while corporate loans dipped to 130 billion yuan from 1.49 trillion yuan, according to Reuters calculations based on central bank data.

Chinese policymakers have been working to arrest further weakness in an economy stuttering in recent months from a prolonged property market downturn and swelling local government debt.

Among their goals is to tackle the side-effects from a mountain of debt left from previous stimulus dating back to the 2008-2009 global financial crisis.

China's central bank governor Pan Gongsheng said China will step up counter-cyclical adjustment and affirm a supportive monetary policy stance, a central bank statement showed on Monday, citing a report Pan delivered to the top legislative body last week.

In late September, the central bank unveiled an aggressive stimulus package including rate cuts, and Chinese leaders pledged "necessary fiscal spending" to bring the economy back on track to meet a growth target of about 5%.

MORE STEPS ON THE CARDS

China unveiled a 10 trillion yuan debt package on Friday to ease local government financing strains and stabilize flagging economic growth, as it faces fresh pressure from the re-election of Donald Trump as US president.

New measures planned will include sovereign bonds issuance to replenish the coffers of big state banks, and policies to support purchase of idle land and unsold flats from developers, Finance Minister Lan Foan said.

Analysts at OCBC Bank expect the central bank to deliver another cut in banks' reserve requirement ratio in November or December to support the planned bond issuance.

China watchers are skeptical the steps will produce a near-term boost in economic activity as most of the fresh funds will be used to reduce local government debt, but China's central bank said it will continue supportive monetary policy to create a favorable monetary and financial environment for economic growth.

The PBOC also said it will study and revise money supply statistics to better reflect the real situation of the country's money supply.

Trump's election win could also prompt a stronger fiscal package in expectations of more economic headwinds for China. Trump threatened tariffs in excess of 60% on US imports of Chinese goods, rattling China's industrial complex.

Broad M2 money supply grew 7.5% from a year earlier, central bank data showed, above analysts' forecast of 6.9% in the Reuters poll. M2 grew 6.8% in September from a year ago.

Outstanding yuan loans grew 8.0% in October from a year earlier. Analysts had expected 8.1% growth, the same pace as in September.

The outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to a record low of 7.8% in October, from 8.0% in September. Acceleration in government bond issuance could help boost growth in TSF.

TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies, and bond sales.

In October, TSF fell to 1.4 trillion yuan from 3.76 trillion yuan in September. Analysts polled by Reuters had expected TSF of 1.55 trillion yuan.