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ECONOMY | 13-03-2021 09:07

Inflation data casts shadow over government’s target

Price increases slowed slightly in February from previous month, but Alberto Fernández administration’s 2021 target of 29% already looks out of reach.

Prices in February rose 3.6 percent from January, the INDEC national statistics bureau revealed Thursday, a slight deceleration on the preceding two months.

Nevertheless, the steep monthly increase means that inflation totalled 7.8 percent in just the first two months of 2021 in Argentina. The news casts a shadow over President Alberto Fernández’s hopes of tampering down runaway price rises, with the government predicting in its 2021 budget that inflation would reach 29 percent this year. Private estimates, however, forecast a figure of 48 percent.

Over the last 12 months, prices have risen 40.7 percent, INDEC’s data showed, a period in which price controls have been enforced on select items and the economy stalled heavily as restrictions were imposed to tackle the coronavirus pandemic.

Once again, food and non-alcoholic beverages recorded high increases, at a rate of 3.8 percent in February (compared to 4.8 percent the preceding month), with analysts noting sharp rises in fruits, vegetables and legumes, as well as oils, fats and butters.

The sector that recorded the sharpest surge was restaurants and hotels, up 5.3 percent as eating and drinking establishments hiked prices. Transport, meanwhile, was up 4.8 percent.

Alcoholic beverages and tobacco were up 3.6 percent in February, while recreation and culture recorded a rate of 2.3 percent.

Communications recorded a 1.8 percent rise, a sharp slowing on January’s increase of 15.1 percent, after operators were forced to rollback prices by government regulators. The lowest figure was seen in education, which rose only 0.1 percent.

In a statement the Economy Ministry highlighted February’s slowdown from December 2020 and January 2021, though it indicated there was still work to be done.

According to the most recent Central Bank survey of private economists, conducted early March, prices are projected to raise 48.1 percent this year, a decrease of 1.9 points compared to expectations at the end of January.

“The data is relatively positive compared to where it came from, because [Economy Minister Martin] Guzman’s goal [of 29 percent for the year] is way off. Yet 3.6 percent is a high number,” Matías Rajnerman, an economist for Ecolatina told Perfil.

ACM economist Juan Pablo Di Iorio commented that "in February there was a slowdown in inflation due to fewer relative price adjustments, as well as a lower rate of devaluation." 

However, the analyst emphasised that "seasonal factors, such as tourism and inflationary inertia, led to the slowdown being minimal."

Reports this week said that INDEC is working to change the price basket it uses to measure inflation, in a bid to reflect changing consumption habits. The planned modifications, news of which prompted a sell off of Argentina's inflation-linked bonds on the markets, will not be introduced until after the October midterms, in order to avoid political conflicts of interest.

Argentina's economy has been in recession since 2018 and GDP last year was hit severely by the coronavirus pandemic. The country has struggled to contain price rises for years. In 2020, inflation totalled 36.1 percent, following a rate of 53.8 percent the previous year.


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