Argentina’s annual inflation rate climbed to 160.9 percent in November, prior to Javier Milei’s inauguration as president.
Data from the INDEC national statistics bureau, published on Wednesday, revealed that prices rose 12.8 percent alone in November.
The highest increases were seen in healthcare (15.9 percent), food and non-alcoholic beverages (15.7 percent) and communication (15.2 percent).
High inflation has been a chronic problem for Argentina, which closed out 2022 with a rate of 94.8 percent. So far this year, inflation totals 148.2 percent with one month left to report.
Milei, elected on a mandate to tidy up public finances and curb runaway price hikes, has drawn up a series of shock economic emergency measures in an attempt to end the country’s economic woes.
On Tuesday, Economy Minister Luis Caputo announced an austerity programme to combat inflation that includes upcoming reductions of subsidies for energy and transport tariffs, as well as the paralysis of state-funded infrastructure works that have not yet begun.
He also devalued the peso, the national currency, by more than 50 per cent, rising from 400 to 800 pesos to the US dollar at the official rate. Argentina has a complicated structure of currency controls that strictly control access to foreign exchange.
"The key to the devaluation is to drastically reduce the gap" between the official exchange rate and Argentina’s parallel rate, which closed unchanged at 1,070 pesos per greenback on Wednesday, said former deputy economy minister Gabriel Rubinstein.
Tough months ahead
Milei warned in his first speech as president that the coming months will be "tough" and that things will get worse before they get better. He says he is desperately trying to avoid a "catastrophe" such as hyperinflation, which Argentina experienced in 1989 and 1990, though critics say much of the adjustment will be felt by workers.
"The 12.8 percent inflation rate is expected to rise in December," economist Candelaria Botto said in an interview with the AFP news agency.
"As the government has already announced, there will be months of rising inflation," said Botto, who believes that based on the first measures announced, "the only plan to lower inflation that is in sight is to bet on a recession.”
Milei has proposed massive spending cuts for the state and a fiscal adjustment equivalent to five percent of Gross Domestic Product.
JP Morgan warned that inflation could reach 60 percent in December and January alone, forecasting a three percent contraction in GDP next year.
Milei’s first moves were welcomed by the International Monetary Fund, with which Argentina has a US$44.5-billion loan programme. The IMF said in a statement that it supports the measures.
Upcoming increases in fuel prices and tariffs, as well as an accelerated depreciation, "are the perfect cocktail” for high inflation, warned independent economist Joel Lupieri.
– TIMES/AFP
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