Argentina’s election: approaching a fork in the road

The ruling Frente de Todos (FdT) coalition is likely to lose some of its power in congress in Argentina’s midterm elections on Sunday. Policymaking could subsequently go in one of two ways. Our baseline scenario is that, with electoral concerns out of the way, the government will move towards gradual fiscal austerity and a fresh IMF deal. The main alternative, which seems most likely if FdT suffers a heavy electoral defeat, is a shift towards more populist policies to rebuild support, which would increase macroeconomic imbalances and default risks.