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ECONOMY | 11-01-2024 16:45

Inflation in Argentina surpassed 211% in 2023, reveals INDEC

Prices jumped 25.5% in December last year following devaluation of peso; Food prices soared an incredible 251.3% over the last 12 months, says statistics bureau.

Prices in Argentina rose by an average of 211.4 percent in 2023, with inflation of 25.5 percent recorded last December.

The staggering figures, published by the INDEC national statistics bureau on Thursday, lays bare the nation’s ongoing inability to tamp down prices. The annual figure is the highest since Argentina experienced hyperinflation between 1989 and 1991.

December’s rate – the highest of the year – included the impact of  a heavy devaluation of the peso during President Javier Milei’s first month in office.

Inflation last year was propelled in large part by incredible hikes in the prices of food and non-alcoholic beverages, which rose by an average of 251.3 percent in 2023 – more than 40 points higher than the general consumer price index. Within the division, which has a greater impact on the poor, price increases in meat and meat products, plus bread and cereals stood out. 

Other categories exceeding the average pace included household equipment and maintenance (231.7 percent), healthcare (227.7 percent), restaurants and hotels (219.1 percent) and recreation and culture (218.2 percent).

The division with the highest increases last month was miscellaneous goods and services (32.7 percent), as a result of large hikes in the price of personal care items. It was followed by healthcare (32.6 percent), driven by rises in the cost of medicines and prepaid medical schemes; and transport (31.7 percent), due to increases in fuel. 

The two divisions that registered the lowest variations in December were education (6.2 percent) and housing, water, electricity and fuels (13.8 percent).

Core inflation for the month was 28.3 percent, with seasonal prices rising 16.2 percent.

 

Government handover

December’s inflation of more than 25 percent came in a month that saw the handover between the Alberto Fernández and Javier Milei governments. 

Milei, 53, took office in December after winning a resounding election victory on a wave of fury over the country's decades of economic crises marked by debt, rampant money-printing, runaway inflation and a ballooning fiscal deficit.

Since assuming the Presidency, Milei has devalued the peso by more than 50 percent and introduced a comprehensive package of economic reforms in Congress. 

The measures, issued via decree and a sweeping ‘Omnibus bill’ would allow him to dramatically cut spending in Argentina and deregulate the economy by lifting subsidies on utilities and transport — implying further inflation shocks lie ahead. 

Prices, however, are continuing to soar and Argentines remain haunted by hyperinflation of up to 3,000 percent in 1989-1990 and the dramatic economic implosion the country suffered in 2001.

Speaking prior to the publication of the consumer price index, President Milei said that any rate lower than 30 percent would be “tremendous” and a “success.”

"It's a shock, of course, but we were heading for 45 percent. If we get it down to 30, it's a phenomenal achievement, we've brought down a third in one month," he declared on Radio Mitre.

Interior Minister Guillermo Francos pointed the finger firmly at Milei’s predecessor in office, former president Alberto Fernández.

"When President Milei took office, inflation was flying at one percent per day," he argued, adding that "the effects of monetary inflation are seen months after the increase in the money supply occurs.”

For the official, "the worst tax is inflation, worse than that is hyperinflation.” 

Argentines “understand that the measures that were taken were to avoid that and that they are going to be hard,” he added.

"The inflation index is not the responsibility of Milei's government," he declared.

 

Surpassed Venezuela

The velocity of Argentina’s staggering inflation rate means that the country has now surpassed Venezuela as the country with the fastest price increases in Latin America.

Inflation in Venezuela, however, cooled last month to 193 percent, according to the Caracas-based Finance Observatory. Consulting firm Ecoanalítica sees price increases closer to 170 percent.

While estimates varied, almost all economists in Buenos Aires expected annual inflation to have surged past 200 percent in December. 

The LCG consultancy firm estimates that prices have risen by 32.2 percent over the last four weeks, with an inflation rate of 8.4 percent in the first two weeks of the year.

Fausto Spotorno, director of economic research at Buenos Aires-based consulting firm Orlando J. Ferreres y Asociados, told Bloomberg on Thursday that his agency “expect a first half of the year with high inflation that could possibly reach 500 percent in annual terms.”

Spotorno said Argentines will likely suffer triple-digit annual price increases for at least a year.

 

– TIMES/NA/BLOOMBERG
 

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