President Javier Milei and Economy Minister Luis Caputo have expressed satisfaction with the news that inflation is slowing in Argentina, despite consumer prices having soared by more than 46 percent over the last two months.
Monthly inflation decelerated in January to 20.6 percent, but prices rose 254 percent year-on-year, the INDEC national statistics bureau reported Wednesday.
Milei, who this week expressed his dismay at the “horrifying” annual rate, warned that Argentina’s inflation woes were far from over when he took office in December, riding a wave of fury over decades of economic mismanagement.
On Wednesday, he doubled down on his policies.
"If one takes the number alone, isolated, it is horrifying. And indeed it is, but you have to look at where we were and what the trend was," Milei told the LN+ television news channel.
"Inflation has begun a process of deceleration," the head of state argued, saying that it had “been travelling at 50 [percent] per month” and is now “at the level of 15 [percent], and continues to fall."
December’s inflation was 25.5 percent with an annualised rate of 211 percent.
Presidential Spokesperson Maneul Adorni said the government is “very enthusiastic” over the INDEC report, while adding that “clearly there is still a long way to go.”
In a statement issued by the Economy Ministry, Caputo hailed the “path of deceleration” that he claimed “has been observed since mid-December.”
He said the high rate recorded in January “still has an implicit high statistical drag from December, derived from the inherited monetary overhang and relative price corrections in the first week of the current administration.”
Not all experts were quite as positive.
"There is little to celebrate with inflation at these levels, especially because in December wages fell below nine percent and in January were closer to 15 percent, below inflation," said economist Hernán Letcher.
Most private estimates had expected the figure to come in between 18 and 23 percent.
High hikes
The items recording the highest increases in January were miscellaneous goods and services, which rose 44.4 percent month-to month, mostly as a result of personal care items.
Large hikes were also seen in transport (26.3 percent), communication (25.1 percent), and food and non-alcoholic beverages (20.4 percent), according to INDEC’s data. Leading the former were public transport hikes, following the removal of subsidies, and rising fuel costs.
The two divisions that registered the lowest variations in January were clothing and footwear (11.9 percent) and education (0.9 percent). Schools are currently off-term.
Regionally, Patagonia recorded the highest price hikes, 24.2 percent in January, with the lowest variation seen in the northeast (19.5 percent).
The difficult situation is forcing many in Argentina to cut back on essential items. According to INDEC, a kilo of bread now costs 1,214 pesos (roughly US$1.30 at the official exchange rate), while a litre of milk cost 842 pesos (US$0.95).
"Some things I ate before I don't eat now, like cheese and meat," Elsa González, a 74-year-old retiree, said as she shopped in Buenos Aires this week.
Some are even forgoing medical care. Healthcare soared 20.55 percent last month.
"With daily medications, now I have to take half a pill or less than before because of the price," said Ramón Zamudio, 70, who cleans and takes care of a building in downtown Buenos Aires.
According to INDEC, the basic food basket for a family of four to avoid living in extreme poverty is 285,561 pesos (around US$324.50). In order not to be considered poor, the same household would need 596.823 pesos (US$674.70).
More than 40 percent of the population lives in poverty, according to INDEC data published in the latter half of 2023.
Sweeping changes
Argentina continues to be in the grip of a deep economic crisis, with several international agencies forecasting that the country will enter recession this year.
Milei too has followed that line, warning that the situation will get worse before it improves. Nevertheless, he is confident his "shock" treatment will pay off.
The La Libertad Avanza began his term by devaluing the peso by more than 50 percent, slashing transport and fuel subsidies, and getting rid of price controls.
The president declared Wednesday that "economic activity would have fallen much more" had he not implemented the new policies and that poverty would come to affect 90 percent of the population.
"We are focusing on taking care of the most vulnerable class," Milei claimed, while detailing increases in social allowances.
Milei has estimated that inflation would come under control within two years. But the 53-year-old libertarian and self-described "anarcho-capitalist" is however struggling to get his reforms through Congress, where his party is firmly in the minority.
After marathon debates, his flagship ‘omnibus bill’ reform package – which touches on many areas of public and private life, from privatisations to cultural issues, the penal code, divorce and the status of football clubs – was watered down and eventually sent back to committee for a rewrite.
But in a symbol of support for Milei's reforms, the International Monetary Fund in late January issued a fresh disbursement of US$4.7 billion in funds, as part of Argentina’s US$44-billion aid programme.
International Monetary Fund chief Kristalina Georgieva at the time praised Milei government's "bold actions to restore macroeconomic stability and... address long-standing impediments to growth."
The Organisation for Economic Cooperation and Development (OECD) said last week it expects Argentina's economy to shrink by 2.3 percent this year. The IMF predicts a deeper contraction of 2.8 percent.
At 20.6 percent, monthly inflation remains close to Argentina’s historical record of 27 percent registered in February 1991.
In the Central Bank’s latest market expectations survey, experts forecast that inflation will continue to slow in the coming months, reaching 15.3 percent in March and 13 percent in April.
– TIMES/AFP/NA/PERFIL
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