Argentina’s August Inflation Reaches Highest Level Since 1991

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Introduction: Argentina is grappling with a significant economic hurdle as its Consumer Price Index (CPI) is anticipated to have surged by 11.8% in August, marking the most substantial monthly increase since 1991. This inflationary surge follows a sharp devaluation of the local peso currency in the preceding month.

The Devaluation Trigger: The peso devaluation, resulting in a nearly 20% loss in its value, was triggered by the unexpected performance of radical libertarian candidate Javier Milei during the country’s open primary election. Milei’s platform, which includes dismantling the central bank and adopting the dollar as the official currency, garnered support from 30% of voters, causing significant upheaval in Argentina’s financial markets.

Economic Consequences: Even before this latest surge in inflation, Argentina was already grappling with an annual inflation rate approaching 115%. This high inflation rate has led to a severe cost of living crisis, pushing many citizens into poverty. Furthermore, this ongoing economic crisis is significantly reshaping the country’s political landscape, with general elections scheduled for October.

Impact on Inflation Figures: Sergio Massa, the Minister of Economy and a presidential candidate for the ruling Peronist bloc, characterized August as “the most challenging month for Argentina’s economy in the past 25 years.” He emphasized that the consequences of this economic turmoil would be evident in the forthcoming inflation data.

Analyst Predictions: According to a Reuters poll of 28 analysts, the expected monthly inflation rate for August ranges from 9.3% to a maximum of 12.9%. The official data, to be reported by Argentina’s National Institute of Statistics and Censuses (INDEC), is set to be released this Wednesday.

Economic Advisors’ Projections: C&T Economic Advisors, projecting an 11% monthly increase for August, pointed out that this figure is poised to surpass the peak of 10.4% recorded in April 2002 during a significant economic crisis. It is also expected to equal the inflation rate observed in March 1991, just before the country implemented a currency peg.

Continued Inflation Challenges: Price hikes have been on an upward trajectory since the second half of July, and the sudden surge in exchange rates on August 14 further exacerbated the situation. Analysts foresee inflation continuing to hover in the double digits throughout September.

Future Economic Impact: Eugenio Mari, Chief Economist at the Libertad y Progreso Foundation, highlighted that the substantial increase in the August CPI will have a lingering effect on future inflation figures, adding to Argentina’s ongoing economic complexities.

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