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ECONOMY | 28-02-2023 15:49

20% in Q1? Analysts say Argentina’s inflation will overshoot government targets

Private estimates agree that prices are likely to rise 20% in the first quarter of 2022, with inflation set to accelerate next month, pushing Sergio Massa’s stated 3% target for April way out of reach.

Food prices in Argentina shot up again in February, overheating the consumer price index and pushing the national government further and further away from Economy Minister Sergio Massa’s publicly stated goal of a three-percent monthly rate by April.

According to private projections, inflation for the second month of this year will clear six percent and take the year-on-year variation beyond 100 percent, a figure already anticipated by the market.

With price hikes continuing to soar, the government's goal – outlined in the 2023 Budget – of closing the year at 60 percent is a fantasy. Private estimates for the first quarter of the year are already hovering around 20 percent, after January's shock six-percent rise ended the fragile slowdown recorded in the last two months of 2022.

The state of play exposes the difficulty in curbing inflation momentum with price controls. In the words of the Fundación Capital think-tank, "once again it has been demonstrated that a permanent moderation of inflation will require a comprehensive economic programme.”

For some analysts, February’s consumer price index is already in play. For Fundación Capital, the figure will be around six percent monthly, similar to January’s rate. This will mean that Argentina’s inflation over the last 12 months would surpass 100 percent, the dreaded three digits.

"Additionally, the month of March could mark an even higher record, around 6.5 percent monthly, in line with typical increases from the month associated with the beginning of the school year and the autumn/winter season in garments and footwear. Moreover, two-thirds of households will receive an update in gas bills of between 40 percent and 50 percent, depending on household income (except social tariff beneficiaries who will not have increases), which would add half-a-point to the month's inflation record," says the latest Fundación Capital report.

"Major users in commerce and industry will have increases of around 70 percent, which although they will not have a direct impact on the consumer price index, or will do so indirectly through higher costs, will be passed on to final prices,” it continues, additionally highlighting monthly updates for bus and train fares in the Buenos Aires Metropolitan Area (AMBA). 

The report concludes that the first quarter of the year will see a cumulative inflation rate of around 19.7 percent ahead of a second quarter in which the risks to price dynamics "are deepening.”

In the same vein, Santiago Manoukian, head of research at the Ecolatina consultancy firm, said in an interview that his firm is projecting a first-quarter rate “in the area of 20 percent.” 

Meanwhile, María Castiglione of C&T Consultores predicts inflation rates of 6.2 percent for February and 6.9 percent for March. "Official inflation would be 20.3 percent for the first quarter of the year,” she told Perfil.

Such a turn of events would mean that the government's annual inflation target of around 60 percent year-on-year for 2023 looks unlikely.

"At this stage of the game, the private sector assumes between 5.5 [percent] and a little over six percent for February,” said Andrés Reschini, an analyst at F2 Soluciones Financieras, highlighting that the most recent Central Bank survey of market expectations forecast a February rate of 5.5 percent.

“If we take the more optimistic 5.5 percent, for the year to close at 60 percent there has to be an average [rate] of 4.06 percent from March to December. So it is already very difficult.”

He continued: "In that sense, the market is discounting that 60 percent [per annum] will not be possible and has in mind numbers which look more like 100 percent."

"The fiscal deficit grew again in January, [monetary] issuance grew in February. The drought will be a huge blow and to top it all, an election year,” added Reschini.

“I don't see much chance of meeting the 60 percent target under these conditions.”

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Santiago Escobar

Santiago Escobar


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