Inflation in Argentina is skyrocketing and there seems to be no control on it. Amid a tense social climate, prices rose 25.5% in December, taking the annual figure to 211.4%, the highest in three decades, according to official data. Xavier Miley’s perception As President.Thank you for reading this post, don't forget to subscribe!
Argentine analysts also estimate that accumulated inflation will reach 213% by 2024.
Last year’s record also showed Argentina overtook Venezuela for the first time in years to become the country with the highest inflation rate in all of Latin America. The Venezuelan Observatory of Finance (OVF), independent from the government, reported that price growth in that country reached 193% in 2023, below Argentina.
In addition, various experts were consulted vermilion He warned that this figure leaves a scenario of economic stress for Argentina throughout 2024.
“For January we expect inflation to be around 20%, just a step down from December, and the month will follow with similar characteristics,” said economists at consulting firm C&T.
These estimates are not surprising if one takes into account that President Javier Meili himself had predicted “two years of sacrifice” before Argentina’s economy could be reactivated.
“Inflation is going to happen, because when you do fiscal restructuring it is going to have a negative impact on economic activity,” he declared days before formally assuming office.
Reasons behind surge in inflation
The rise in prices in the last part of last year is mainly explained by the 54% devaluation of the peso that the new government implemented in the first days of its administration and the liberation of price controls in various sectors that were previously deregulated. State, he explained vermilion Economist at the consulting firm Emperia Matias De Luca.
In this sense, the divisions with the largest growth in the month were goods and services, health and transportation, due to increases in the price of personal care products, drugs, prepaid drug charges and fuel.
According to the Consumer Price Index released by the National Institute of Statistics and Census (INDEC), the sector that grew the most among all sectors in the country was food and non-alcoholic beverages, which increased by 29.7% due to price increase. In meat and its derivatives: bread and cereals.
If we look at the measurements throughout the year, food was the item that had the most growth and also had above average inflation, as the progress for food products was 251.3% throughout 2023 and in the Greater Buenos Aires region it reached 252.9%.
“This data increases social pressure on the population,” commented Luca economist.
The data was well received inside the government of Javier Meili and his Economy Minister Luis Caputo. Economy Ministry spokesmen advised, “This is a clearly better number than the consensus of private economists, who had estimated inflation to be much closer to 30%.” vermilion,
The President himself said: “If inflation is close to 25%, the success is tremendous.”
Highest inflation in Latin America
Thus, inflation in Argentina was highest in monthly and annual measurements compared to the rest of Latin American countries.
According to the Venezuelan Observatory of Finance (OVF), the only country in the region, apart from Argentina, that reached triple digits in its annual growth is Venezuela, whose price variation was 3.9% monthly and accumulated 193% over the year.
For example, inflation in other neighboring countries is well below these values. In Uruguay, prices recorded -0.11% and in 2023 they were 5.11%, in Brazil the index was up 0.4% in December and 4.72% on the year, while in Chile a decline of 0.5% was recorded in the last month. An increase of 3.9% over the last year and all of 2023.
“For years we have been hearing that Argentina could overtake Venezuela and we see how bad things are there, but now it turns out that we are the ones who are worse off,” he said. vermilionIn voices of anguish came Ricardo Herrera, a businessman who works in the center of Buenos Aires and has seen how his sales have fallen, while the products have increased.
What will happen to Argentina’s inflation in 2024?
Beyond the data released this Thursday by the official body INDEC, both government and private analysts warned that it will take several months for inflation to begin to decline and that there is already a very high floor for January, with inflation already at 20%. Estimated around. ,
Experts from the consulting firm C&T said that to increase the tourism sector we must add a 40% increase in social actions and a 50% adjustment in public transportation in Greater Buenos Aires, factors that should once again boost price levels. Will give. In early 2024.
“Inflation for the entire month could be around 20%, a step down from December,” he said.
“The year started with the announcement of some increases in regulated prices and hitherto stable prices. Fuel increased by almost 90% in a month resulting in impact on other prices in the economy. The first authorities are also added to the increase in public transportation. This puts a floor of 15 points for inflation in January. Although a slowdown may be seen compared to December, we expect a record high this month too, around 25%,” consulting firm LCG assessed.
Additionally, they added a point that could have a major impact within the pricing structure: the removal of subsidies from energy and transportation rates, which would affect the final cost users pay for these services. It also remains to be known how the official exchange rate will decline.
“The likelihood of convergence towards lower levels of inflation will depend on how the government manages expectations through the proposed regime change for the economy. Without heterogeneous policies (price controls, price and wage agreements) that complement it, a surge in inflation could delay the entire program or render it ineffective,” he described in the LCG.
The truth is that for the coming months, private consultants estimate that the consumer price index will be 25% in January and will reach 213% in 2024.
On the other hand, he also warned that inflation will remain in double digits at least until the middle of the year, and then start moving downwards. Specifically, economists consulted by the Central Bank expect prices to rise by 25% in January, 18.2% in February, 15% in March, 12% in April, 10% in May and 8.3% in May. % in June.