The price index in May, published Thursday by the National Institute of Statistics (Indec), fell below 5% for the first time since November 2022 when it reached 3.9%. A deceleration therefore continues, for which the government of ultraliberal President Javier Milei is pleased: after 25.5% in December – under the mechanical effect of a strong devaluation of the peso decided by the same Milei -, 20.6% in January , 13.2% in February, 11% in March and 8.8% in April.
“The ongoing process of disinflation has deepened,” rejoiced Finance Minister Luis Caputo on social media. In corrected data, inflation in Latin America’s 3rd largest economy still reached 71.9% over the first five months of 2024, and 276.4% over twelve months (289.4% in April). May’s inflation was mainly driven by the communication (8.2%) and education (7.6%) sectors.
Contraction. But beyond the price index, consumption and activity are plummeting under the effect of the December devaluation and all-out budget cuts. The recession is taking hold, with the economy contracting 5.3% in the first quarter compared to the same period last year, and SME retail sales contracting 16.2% since January.
“The significant drop in consumption largely explains the reduction in the inflation rate since December,” economist Hernan Letcher, director of the Argentine Center for Political Economy (CEPA), explains to AFP. The Argentine economy is expected to contract by 2.8% this year, according to the International Monetary Fund (IMF), after already a decline of 1.6% in 2023.
But, for President Milei, a recovery is already there or almost there, with an increase in real private sector wages in April of 16%: the recovery of purchasing power “the most significant since 2009”, trumpeted the presidency. A relative salary figure, however, in a country where informal employment represents more than 45% of the active population, according to the latest official figures from the end of 2023, even before the impact of austerity measures.
Commercial premises for rent on a street in Buenos Aires, June 13, 2024 in Argentina. – LUIS ROBAYO – Buenos Aires (AFP)
Poverty. Denying a recovery, opposition and social movements cite a country in suffering, with poverty on the rise since the end of 2023, to 55.5% of the population in the first quarter of 2024, compared to 44.7% a year earlier, according to the Catholic University Social Debt Observatory (ODSA-UCA).
The latest official half-yearly figure, on a separate calculation basis, showed 41.7% of poor people at the end of 2023. The inflation figures are published a few hours after the approval by the Senate of all of the deregulatory reforms desired by President Milei who thus obtained support from Parliament for the first time in his six months in power.
Tomás VIOLA
© Agence France-Presse
