Inflation in Argentina heats up again amid the “second wave” of Covid-19
RIO DE JANEIRO, BRAZIL – The National Institute of Statistics and Census reported on Thursday that consumer prices in Argentina in March were slightly more than one percentage point above the 3.6% rate recorded in February, when inflation had shown a slight moderation after the price hike in December and January. The index recorded in the third month of the year is the highest since September 2019.
Meanwhile, consumer prices increased 42.6% in March year-on-year and accumulated a 13% rise in the first quarter of the year. According to the official report, among the increases recorded in March, educational services (28.5%) and clothing (10.8%) stood out.
But the increase with the highest incidence in the indicator -and which triggers alarms due to its impact on the cost of the basic basket and on the poverty level- has been food and beverages: 4.6% in relation to February and 44.8% in interannual terms.
The Government said Thursday that it will adopt measures to contain the rise in food prices and guarantee supply.
Consumer prices had accumulated a rise of 36.1% last year, achieving a slowdown compared to the 53.8% posted in 2019, in a context of economic recession that began in 2018 and has been deepened by the Covid-19 pandemic.
WORRYING PHENOMENON
According to a recent survey by consulting firm D’Alessio IROL, inflation remains citizens’ main focus of concern, above insecurity due to crime or fear of Covid: 8 out of 10 Argentines in March showed concern about the rising prices.
The concern is not only persistent over time – annual inflation in Argentina has not dopped below 10% since 2011 – but is growing.
According to the latest inflation projections survey conducted by the Torcuato Di Tella University, inflation expected by the population for the next twelve months rose from 45.2% in February to 46.3% in the March measurement.
Argentina’s chronic high inflation is one of the most complex variables of its macroeconomy, but it becomes even more relevant at a time when the country – whose GDP has been in recession for three years and plummeted 9.9% in 2020, hit by the pandemic – is trying to reactivate itself, but is currently facing the second wave of Covid-19, with uncertain consequences.
For Eduardo Fracchia, director of the Economics Area of the IAE Business School of the Austral University, the sustained increase in prices “distorts savings and investment decisions,” shortening the prediction levels of both companies and individuals.
FAR FROM THE OFFICIAL GUIDELINE
Private economists, which the Central Bank consults for its monthly expectations report, project an average inflation of 46% for this year, while the government of Alberto Fernández maintains a forecast of 29% for 2021.
“Given the lack of a plan to attack inflation, the different factors that feed it will continue to operate throughout the year,” warned Victor Beker, director of the Center for the Study of the New Economy of the University of Belgrano.
Fuel prices and utility rates are yet to be updated, while the high international prices of grains exported by Argentina put pressure on food prices in the domestic market.
In addition, if the pandemic does not subside and the funds that the State must allocate to address the health and economic crisis do not increase, a larger fiscal deficit would force a higher monetary emission, with an impact on inflation.
“In short, it is no longer a question of whether annual inflation will reach the 29% proposed by the economic authority, but whether it will be possible to prevent it from returning to a level close to the 53.8 % recorded in 2019,” said Beker.
More: Argentina news in English, every day from The Rio Times.
This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief