Monthly inflation in Argentina dropped below two percent for the first time in almost five years in May, the INDEC national statistics bureau reported Thursday.
Consumer prices rose just 1.5 percent last month, according to INDEC, slowing from the 2.8 percent in April and 3.7 percent recorded in March. It’s the lowest monthly tally since May 2020 and the first time since July 2020 that it passed below two percent.
The news is a boost for President Javier Milei, Argentina’s self-declared "anarcho-capitalist" head of state who came to power in December 2023 wielding a chainsaw as a symbol of his plan to restore fiscal discipline and curb runaway prices.
In the La Libertad Avanza leader’s first month in office, consumer prices soared by more than 25 percent.
According to INDEC, inflation so far this year totals 13.3 percent. Prices over the last 12 months have increased 43.5 percent – well below the 211 percent annual rate recorded at the end of 2023 when Milei was inaugurated.
The largest increases for the month were seen in the restaurants and hotels category (up three percent), communications (up 4.1 percent, mainly due to telephone and Internet services) and housing, water and electricity (up 3.1 percent).
The two divisions that recorded the lowest variations were food and non-alcoholic beverages (0.5 percent) and transport (0.4 percent).
Core inflation stood at 2.2 percent last month, with seasonal prices decreasing 2.7 percent and regulated costs rising 1.3 percent.
The 1.5-percent rate was the lowest since May 2020. Excluding the specific impact on the consumer price index in the early months of the pandemic, monthly inflation was the lowest since November 2017.
Private consultancy firms had forecast a rate of around two percent or lower. The most recent Central Bank survey of market expectations forecasts annual inflation of 28.6 percent in 2025.
Last year, Argentina recorded its first budget surplus in a decade, but the collateral damage was a loss of purchasing power, jobs, and consumer spending.
In April, Argentina received an initial US$12 billion from a new US$20-billion loan agreed by the International Monetary Fund (IMF) to support a "comprehensive economic programme."
When the loan deal was announced, the IMF said it was built on "the authorities' impressive early progress in stabilising the economy, underpinned by a strong fiscal anchor, that is delivering rapid disinflation and a recovery in activity and social indicators."
Success in curbing prices is the result of an austerity programme that entailed firing tens of thousands of public sector workers, halving the number of government ministries and vetoing inflation-aligned pension increases.
Milei’s government celebrated INDEC’s update, which it attributed to the economic team's "successful orthodox stabilisation plan."
We “carried out a historic 15-point adjustment of the (Gross Domestic Product) GDP, ended money-printing and eliminated the cepo," Presidential Spokesperson Manuel Adorni wrote on his WhatsApp channel to journalists, referring to strict exchange controls that had been in place since 2019 and were partially eliminated this year.
The positive numbers will do little to quell the anger of Argentines over their loss in purchasing power, with wages having remained stagnant over many months of high inflation.
Cristián Rodríguez, a 45-year-old logistics employee, said the rising cost of living is outpacing wage hikes, affecting his family's standard of living.
"Prices are not dropping; they are rising," said Rodríguez. "Everything edible is going up," he added.
"Just as inflation has reportedly dropped, salaries have also been paralysed. We haven't had a raise for a year," he explained.
– TIMES/AFP/NA
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