(Bloomberg) -- Argentina entered a recession in the first quarter of the year as President Javier Milei’s brutal spending cuts sent consumption and activity plummeting.

Gross domestic product fell 2.6% compared to the fourth quarter of 2023, according to official government data published Monday. Activity contracted 5.1% from a year earlier, slightly less than the median estimate for a 5.3% decline among economists surveyed by Bloomberg. The negative print follows a 2.5% quarterly contraction in the three months through December.

The first months of the year were marked by sharp cuts to real pensions and public sector wages and a halt in public infrastructure projects. When he took office in December, Milei also devalued the peso by more than 50% and stripped hundreds of price controls. Real wages fell 17% from November to March, triggering a 10% drop in supermarket sales over the same period.

Construction, manufacturing and retail sectors led the declines, offset by agriculture and mining, according to the government. Capital spending, a proxy for investment, fell 23.4% from a year prior, while retail sales fell 8.7%. Unemployment rose to 7.7% from 5.7% in the previous quarter, according to another set of government data.

The painful contraction in activity has nonetheless seen the government post five consecutive monthly budget surpluses and a faster-than-expected easing of monthly inflation, from 25.5% in December to 4.2% in May. The International Monetary Fund expects a potential stabilization in activity in April as private credit and cement consumption tick back up, agricultural production rebounds after last year’s drought and consumer confidence gains ground, according to their latest Argentina report.

Economists surveyed by the central bank estimate GDP will fall 3.8% this year, followed by 3.4% growth in 2025. Milei’s hallmark legislation is expected to win final approval in the lower house later this week, which is expected to contribute significantly to the rebound by relaxing labor laws, deregulating the energy sector and incentivizing large foreign investments through tax breaks.

--With assistance from Rafael Gayol.

(Updates with sector declines in fourth paragraph)

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