President Javier Milei stopped all new public works projects as part of his drive to slash spending
President Javier Milei stopped all new public works projects as part of his drive to slash spending AFP

Argentina's austerity-hit economy contracted by 5.1 percent in the first quarter, the national statistics agency said Monday, driven by a slowdown in the construction and manufacturing industries.

President Javier Milei, who took office in December, stopped all new public works projects as part of his drive to slash spending, and the construction sector was down 19 percent, data showed.

The manufacturing industry contracted by 13.7 percent and the only sector growing was exports -- up 26.1 percent year on year.

Milei, a self-declared "anarcho-capitalist," vowed to take a chainsaw to decades of overspending and rein in inflation which in May hit 4.2 percent, its lowest point in two and a half years.

Analysts warned that the gains were a result of a massive economic slump as shoppers tighten purse strings and the poor and working classes struggle to make ends meet.

When he took office, Milei cut the cabinet in half, slashed 50,000 public jobs, ripped away fuel and transport subsidies, and sharply devalued the peso.

Milei, who is visiting the Czech Republic, on Monday hailed "the largest fiscal adjustment not only in Argentine history but also in humanity."

The statistics institute revealed that 7.7 percent of the working population was unemployed, up 0.8 percentage points compared to the same period last year.

The International Monetary Fund expects Argentina's economy to contract by 2.8 percent this year, after a 1.6-percent decline in 2023.