Defaults rise and delinquency grows: warnings despite the recovery in consumption

Although the Casa Rosada emphasizes the slowdown in inflation and a nascent improvement in consumption, other indicators are beginning to raise alarm bells on the economic front . These include rising unemployment, falling exports, and rising financial defaults among businesses and households.

Inflation, which reached critical levels at the end of last year, has been on a downward trend in recent months. This decline, along with the 5.5% year-over-year growth in consumption in May, is being hailed by the ruling party as a sign that Javier Milei 's economic plan is beginning to yield concrete results.

This rebound is significant considering that consumption had closed 2024 with a 13.9% contraction, figures reminiscent of the worst moments of the end of convertibility. However, not all the signs are encouraging.

According to INDEC (National Institute of Statistics and Census), exports fell 7.4% in May, marking the first decline during the La Libertad Avanza administration. Despite the surge in imports, which climbed 29.4%, the trade balance remains positive, with US$1.883 billion accumulated in the first five months. However, this figure represents an 80% drop compared to the same period last year, which puts its impact into perspective.

At the same time, some economists are warning about the true state of public finances. Carlos Rodríguez and Walter Graciano pointed out that the deficit, while no longer held by the Central Bank , was transferred to the Treasury and now amounts to 11.25% of GDP. Thus, the much-vaunted surplus is beginning to be reviewed.

The unemployment rate also showed negative figures. Unemployment reached 7.9% in the first quarter of 2025, 1.5 percentage points higher than the previous quarter and 0.2 more than in the same period last year. This equates to more than 1.1 million people out of work in the 31 urban agglomerations surveyed, compared to 822,000 in the last quarter of 2024.

In the private sector, several important firms have been unable to meet their financial commitments. In recent months, companies such as Celulosa Argentina, the Albanesi Group (GEMSA), and PAESA, which announced it would not pay the interest on a dollar bond, have defaulted. This situation follows the previous cases of Los Grobo, Agrofina, and Surcos, in the agricultural sector.

While these situations raise concerns among shareholders and creditors, they also affect mid-sized banks, whose stability could be jeopardized if they fail to collect on their loans. Some banks are already exploring refinancing agreements beyond defaulting on their Negotiable Obligations.

Despite this outlook, the government emphasizes that the financial system continues to show signs of strength. The Argentine Banking Association (ADEBA) reported that solvency ratios increased in March and remain above minimum requirements.

However, delinquency rates began to rise. According to the Central Bank, the non-performing loan ratio for private sector loans reached 2% in March, up 0.2 percentage points compared to February. Delinquency rates for household loans reached 3.3% and for businesses, 0.9%. The worrying fact is that this increase is occurring alongside a sharp increase in credit: in one year, it went from 5% to 11% of GDP.