ARGENTINIAN President Javier Milei suffered a sweeping setback on Sunday in a Buenos Aires provincial election widely viewed as a political test for his far-right party and a barometer for how it will perform in crucial congressional elections next month.

President Milei’s recently formed the Liberty Advances party captured just 34 per cent of the vote in Argentina’s biggest province, losing by a landslide to the Peronist opposition, which secured 47 per cent.

Mr Milei conceded that his far right party’s crushing 13-point loss to his rivals represented “a clear defeat.”

“We suffered a setback, and we must accept it responsibly,” President Milei told supporters at the party headquarters.

“If we’ve made political mistakes, we're going to internalise them, we’re going to process them, we’re going to modify our actions,” he said.

Still, he vowed to stick with his sweeping economic overhaul, saying: “There will be no retreat in government policy.”

Analysts had expected Liberty Advances to lose by a few points to the Peronists, but his allies feared that a worse-than-expected outcome in Buenos Aires province — which makes up nearly 40 per cent of the country’s population — would help to galvanise his rivals.

Peronist leader and the two-time former President Cristina Fernandez de Kirchner said: “Did you see that, Milei? Get out of your bubble, brother. Things are getting heavy.”

The Peronists are now the largest bloc in Argentina's fragmented congress, and have used their numbers to pass social spending measures.

Ms Fernandez waved from the balcony of her home in Buenos Aires, where the former president is serving a six-year sentence under house arrest, to massive crowds of supporters celebrating in the streets below.

Despite being barred from politics for life, she remains the most influential leader of Peronism that emerged in the 1940s from Buenos Aires province and dominated politics for decades.