Argentina’s economy experienced a modest contraction in October, defying expectations amid the uncertainties surrounding the presidential election and a concurrent currency selloff in parallel markets.

In October, economic activity declined by 0.1% compared to the previous month, which was less than the anticipated 0.6% decrease, as projected by economists surveyed by Bloomberg. Government data released on Thursday revealed a 0.6% year-on-year increase in activity for the same month.

Additionally, official figures disclosed a decline in the unemployment rate for the formal labor market during the third quarter, reaching 5.7%. This marks the lowest level since at least 2003.

The lead-up to the October 22 presidential election, featuring a three-way race, triggered market volatility. Argentina’s parallel exchange rate fluctuated from 804 pesos per dollar to a high of 1,035 per dollar within three weeks before partially recovering. This rapid movement contributed to inflation, now exceeding 160% annually, the highest since Argentina emerged from hyperinflation in the early 1990s.

President Javier Milei warns of a challenging economic outlook for Argentina in 2024, emphasizing the risk of “stagflation” as he implements impactful reform measures. Economists surveyed by the central bank are forecasting a 2.4% contraction in gross domestic product for the coming year, doubling the estimated decline for the current year.<