Inflation in Argentina jumped to more than 160% last November before President Javier Milli’s major devaluation of the local currency, and this is likely to lead to further price rises this month.
Standard level
Consumer prices rose 12.8% in November on a monthly basis, exceeding the average estimate of 11.4% of economists polled by Bloomberg who suggested a rise of 11.4%.
Since last year, inflation has reached 160.9% in the South American country, which is the highest level since the early 1990s, when Argentina was suffering from hyperinflation.
This percentage has become a thing of the past, as the victory of Milley, who is known to support the free market, marks the end of fixing the prices of hundreds of products according to a decision that was scheduled to expire after the elections and the devaluation of the currency by 54%, which made it likely that prices would rise.
Milley won a runoff during the presidential election against former Economy Minister Sergio Massa on November 19.
warning
After taking the constitutional oath, the new president warned that the economic situation would “worse” before it gets better. There must be painful austerity, saying, “No government has inherited such a bad legacy.”
Prices have already increased by 15% on the first day of December on a monthly basis, and the month may end with a rise of up to 20%, according to the consulting company C&T Assurance.
JP Morgan expects a cumulative rise in prices of 60% in December and January, according to a recent note. Food and beverage prices led all price increases last November, followed by clothing and living costs.
Measures leading to stagnation
In addition to the devaluation of the currency, Luis Caputo, Minister of Economy in Milley’s government, announced on Tuesday a set of measures to reduce spending by 2.9% of GDP, in order to reach financial balance next year, including vital energy and transportation support.
The new government acknowledges that these measures would lead to an economic recession, but promises that they are the last dose in Argentina’s bitter medicine to address the previous government’s economic mismanagement.
Milley said, in a speech during his swearing-in on Sunday, that difficult times await Argentines, repeating several times that “there is no money,” which was repeated by the Minister of Economy in his government on Tuesday.
He warned that if drastic measures were not taken now, Argentina could see an annual inflation rate of up to 15,000%. The central bank kept interest rates at 133%, while the rate on one-day repurchase transactions fell to 100% from 126%.
