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
TT

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 Mulls Draft Law to Promote Private Sector Development

A Chinese national flag flutters on a financial street in Beijing. (Reuters)
A Chinese national flag flutters on a financial street in Beijing. (Reuters)
TT

China Mulls Draft Law to Promote Private Sector Development

A Chinese national flag flutters on a financial street in Beijing. (Reuters)
A Chinese national flag flutters on a financial street in Beijing. (Reuters)

Chinese lawmakers are deliberating a draft of the country's first basic law specifically focused on the development of the private sector, the country’s Xinhua news agency reported.

“The law will be conducive to creating a law-based environment that is favorable to the growth of all economic sectors, including the private sector,” said Justice Minister He Rong, while explaining the draft on Saturday during the ongoing session of the Standing Committee of the National People's Congress, the national legislature.

The draft private sector promotion law covers areas such as fair competition, investment and financing environments, scientific and technological innovation, regulatory guidance, service support, rights and interests protection and legal liabilities.

The draft has incorporated suggestions solicited from representatives of the private sector, experts, scholars and the general public, the minister said.

China left its benchmark lending rates unchanged as expected at the monthly fixing on Friday.

Persistent deflationary pressure and tepid credit demand call for more stimulus to aid the broad economy, but narrowing interest margin on the back of fast falling yields and a weakening yuan limit the scope for immediate monetary easing.

The one-year loan prime rate (LPR) was kept at 3.10%, while the five-year LPR was unchanged at 3.60%.

In a Reuters poll of 27 market participants conducted this week, all respondents expected both rates to stay unchanged.

Morgan Stanley said in a note that the 2025 budget deficit and mix are more positive than expected and suggest Beijing is willing to set a high growth target and record fiscal budget to boost market confidence, but further policy details are unlikely before March.

Last Friday, data released by the country's central bank said total assets of China's financial institutions had risen to 489.15 trillion yuan (about $68.03 trillion) by the end of third quarter this year.

The figure represented a year-on-year increase of 8%, said the People's Bank of China.

Of the total, the assets of the banking sector reached 439.52 trillion yuan, up 7.3% year on year, while the assets of securities institutions rose 8.7% year on year to 14.64 trillion yuan.

The insurance sector's assets jumped 18.3% year on year to 35 trillion yuan, the data showed.

The liabilities of the financial institutions totaled 446.51 trillion yuan, up 8% year on year, according to the central bank.

Separately, data released by the National Energy Administration on Thursday showed that China's electricity consumption, a key barometer of economic activity, rose by 7.1% year on year in the first 11months of the year.

During the period, power consumption of the country's primary industries increased by 6.8% year on year, while that of its secondary and tertiary sectors rose by 5.3% and 10.4%, respectively.

Residential power usage saw strong growth of 11.6% during this period, the administration said.

In November alone, power usage climbed 2.8% from one year earlier, according to the data.