Argentina's 12month inflation hit 160.9% in November, an uncomfortable level for the recently installed ultraliberal government of Javier Milei, which announced a shock plan to organize public finances and curb the steady rise in prices.
In November alone, consumer prices rose by 12.8%, according to data published on Wednesday (13) by the country's statistics institute. Last month, the sectors with the largest increases were healthcare (15.9%), food and nonalcoholic beverages (15.7%) and communications (15.2%).
Cumulative inflation in 2023 through November is 148.2%, one of the highest inflation rates in the world.
High inflation is a chronic problem in Argentina, which had already ended 2022 with a 94.8% increase in the consumer price index (CPI).
In order to combat inflation and, above all, the deficit in public finances, Milei announced an austerity program that includes cutting subsidies for energy and transport tariffs and halting statefinanced infrastructure work that has not yet begun.
In addition, a currency devaluation of more than 50% to 800 pesos per dollar at the official exchange rate was ordered under an exchange control system that includes a dozen different exchange rates.
“The key to devaluation is that it is possible to dramatically reduce the difference” between the official and parallel exchange rates, which closed this Wednesday (13) unchanged at 1,070 pesos per dollar, said former Deputy Economy Minister Gabriel Rubinstein .
Difficult months and the will to improve
Milei warned that the next few months will be “difficult” and that things will get worse before they get better. But he assures that he is trying to avoid a “catastrophe” like the hyperinflation that Argentina already experienced in 1989 and 1990.
“We expect a December with rising inflation, where this 12.8% will seem small to us,” economist Candelaria Botto told AFP.
“As the government has already announced, inflation will rise in the coming months,” emphasized Botto, who, based on the first measures announced, considered that “the only conceivable plan to reduce inflation is to bet on a recession” . .
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Milei proposed a reduction in the size of the state and a tax adjustment of 5% of gross domestic product.
His initial decisions were praised by the International Monetary Fund, with which Argentina has a $44 billion loan program. The organization said in a statement that it supported their actions.
But increases in fuel prices and tariffs, as well as accelerated devaluation, “are the perfect cocktail for high inflation. Policies aimed at shock will generate a high inflationary effect,” estimated independent economist Joel Lupieri.