Latin America’s third-largest economy is still mired in chronic double-digit inflation for twelve years, with various causes, both internal (fiscal deficits, large-scale inflationary expectations) and external (more recently, the war in Ukraine), weighing on macroeconomic recovery, especially after the pandemic.
Argentina recorded inflation of 94.8% in 2022, a 32-year record for the Latin American country and among the highest in the world, although the index did not exceed 5.1% in December, which appeared to confirm the its de-escalation for a few months.
The December index, released Thursday by the national institute of statistics (INDEC), reflects that the downward trend is gaining some length, after peaking at 7.4% in July, then falling to 6.3% in October and to 4.9% in November.
In 2021, this ratio closed at 50.9%, and the government intends to reduce it to 60% in 2023, as set out in the state budget.
The previous record was set in 1991, when inflation exceeded 100%, at the end of a hyperinflationary cycle (when the index soared above 1,000%).
Latin America’s third-largest economy is still mired in chronic double-digit inflation for twelve years, with various causes, both internal (fiscal deficits, large-scale inflationary expectations) and external (more recently, the war in Ukraine), weighing on macroeconomic recovery, especially after the pandemic.
Development
The country was expected to close 2022 with a growth rate of around 5%, after expanding activity by 10.3% in 2021, following three years of recession.
In 2023, growth is expected to slow to 2%, in line with the international trend, but will be among the highest in Latin America, according to World Bank forecasts released this week.
The three consecutive years of growth have no precedent since the 2006-2007-2008 period in the country, the government of center-left president Alberto Fernandez keeps reminding.
Prices in December, according to INDEC, increased mainly in the hotel and restaurant, beverage and tobacco sectors. Trends not unusual during the southern hemisphere summer.
Economy Minister Sergio Massa — the third to hold the portfolio in a year — is counting on relatively contained inflation, between 3 and 4% month-on-month, on the gradual replenishment of foreign exchange reserves (mainly thanks to record exports in 2022 ) and on tighter fiscal discipline (the deficit target went from 2.5 to 1.9% of GDP in 2023) to stabilize the economy.
The International Monetary Fund (IMF), with which the Fernandez government struck a deal in March to refinance Argentina’s $44 billion debt to the institution, a legacy of the 2018 loan agreement, approves—most recently in December—his policy.
Nevertheless, although activity is recovering and unemployment is falling (7.1%), wages are unable to keep up with inflation and employment, a fortiori informal, offers no guarantee against precariousness. Of which 36.5% of Argentina’s 47 million citizens live in poverty, including 2.6 million in extreme poverty, according to the latest available data, in mid-2022.
RES-EMP
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With a wealth of experience honed over 4+ years in journalism, I bring a seasoned voice to the world of news. Currently, I work as a freelance writer and editor, always seeking new opportunities to tell compelling stories in the field of world news.
