Argentina doubles its inflation in one year by climbing to 94.8% in 2022

Argentina almost doubled its inflation in 2022, closing with 94.8% year-on-yearas reported by the National Institute of Statistics and Censuses of Argentina (Indec) on Thursday, January 12, 2023, climbing to an unprecedented figure since the end of the last hyperinflation of the South American country, 30 years ago.

Accumulated inflation as of December 2022 was based on the high level of 2021, of 50.9%, and accelerated notably —last November it was 85.3%— due to the impact of the war in Ukraine on prices of food and energy on internal macroeconomic deterioration and political uncertainty caused by changes in the Ministry of Economy in the middle of the year, according to private analysts.

In monthly terms, inflation in December 2022 advanced to 5.1%, compared to the 4.9% registered last November, discontinuing the downward path in relation to the monthly peak of the year, of 7.4% reached last July, and 6.7% in March last year, due to the impact of these internal and external ‘shocks’.

Both goods and services had a positive variation of 5.1% last month compared to Novemberdata that amount to 97.9% and 86.8%, respectively, in the interannual comparison.

The sectors that rose above average in December were “restaurants and hotels” (7.2%), followed by “alcoholic beverages and tobacco” (7.1%), while the increases in domestic services had an impact on ” home equipment and maintenance” (5.9%); of fuels, in “transport” (5.8%) and private medicine, in “Health” (5.7%).

Meanwhile, the increase in “food and non-alcoholic beverages” (4.7%) was the one that had the greatest impact in most regions, highlighted INDEC, an item that suffered a year-on-year increase of 95%.

Low value of local currency

Another factor that, according to analysts, was key to the acceleration of inflation in 2022 is the limit that the market placed on public sector financing, which forced the Central Bank to act as lender of last resort.

“There is low demand for pesos, the local currency. Our currency is not a safe haven of value. And any monetary excess that is generated by the need to issue for the treasury or to buy dollars easily becomes inflationary pressures that are added to other factors that cause inflation,” the head of the Abeceb Economic Team, Elisabet Bacigalupo, explained to EFE. .

Inflation in Argentina is structurally high and detaches from the current global rise: “This recurring history of bad macroeconomic policies generates, in short, a strong mistrust in the value of the currency,” Bacigalupo said.

distant expectations

The projection of the Government of Alberto Fernández in the 2023 budget is that of 60% inflation; Meanwhile, the Minister of Economy, Sergio Massa, declared last weekend that “the objective is to put 3% (monthly) ahead in April (next).”

But the last survey made by The Central Bank among private analysts pointed out that Argentina will close 2023 with an inflation of 98.4%while expectations for monthly inflation next April are 6%.

Experts point out that 2023 began with a high floor for price increases and they do not foresee a stabilization program that orders fiscal and monetary policy to contain market inflation expectations.

With information from EFE.