Shortly after Argentina’s new liberal government came to power, annual inflation rose to 160.9 percent. Inflation rose faster than previously expected.
It is the highest monthly value this year. This makes clear the enormous challenges that new President Javier Milei faces if he wants to get the extremely difficult economic conditions under control. The data is the first inflation data since Milei took office last Sunday.
In November alone, prices in the South American country hit by a serious economic crisis rose by 12.8 percent, the national statistics agency Indec announced on Wednesday in Buenos Aires. In particular, the costs of healthcare, food and telecommunications rose sharply. As recently as October, monthly inflation was ‘only’ 8.3 percent. Inflation is expected to rise even faster in the coming months.
Devaluation of the currency by 50 percent
One of the reasons: the government of Milei devalued the national currency, the peso, by more than 50 percent this week. This devaluation is part of a comprehensive ‘shock package’ that the government hopes will ultimately stabilize the economy.
Milei’s Economy Minister Luis Caputo announced in a televised speech on Tuesday the official exchange rate of 800 pesos per dollar – previously the price for one dollar was just under 400 pesos. The central bank will aim for a monthly devaluation of 2 percent, Caputo said. The purpose of the devaluation, which was welcomed by the International Monetary Fund (IMF), was simply to “avoid a catastrophe,” the economy minister said. And: “We have no more money.”
I welcome the decisive measures announced by the President @JMilei and its economic team today to address Argentina’s significant economic challenges – an important step toward restoring stability and rebuilding the country’s economic potential.https://t.co/1zZRES9anE
— Kristalina Georgieva (@KGeorgieva) December 12, 2023
The devaluation of the national currency should give the productive sector “appropriate incentives” to increase production, Luis Caputo said. The purpose of the devaluation is, among other things, to stimulate exports – Argentine products become cheaper compared to those abroad – and to reduce imports. Ultimately, the trade deficit, which in the eyes of the government is the root of all evil, must be reduced. According to economic logic, this would also strengthen the currency.
But Argentina is still far from that. Caputo also admitted that: Things will probably get worse before they get better.
1,200 pesos for 2 kilos of potatoes
Argentina’s inflation rate is one of the highest in the world. To finance the budget deficit, the central bank has continuously printed new money. South America’s second-largest economy suffers from a bloated state apparatus, low industrial productivity and a large shadow economy that deprives the state of much tax revenue.
“This exploding inflation will hit people hard,” a 46-year-old bricklayer from Buenos Aires told Reuters. “Last week I bought two kilos of potatoes for 800 pesos, this week they cost almost 1,200 pesos.” The Argentinian said he did not know if he would be able to buy the same groceries next week.
The new ultra-liberal president Javier Milei now wants to get Argentina back on track with a radical austerity program. The government announced a series of cuts on Tuesday in addition to the devaluation of the peso. However, Milei himself warned that inflation would initially remain high despite the consolidation rate.
(lacquer, with material from sda/awp/dpa)
Soource :Watson
I am Amelia James, a passionate journalist with a deep-rooted interest in current affairs. I have more than five years of experience in the media industry, working both as an author and editor for 24 Instant News. My main focus lies in international news, particularly regional conflicts and political issues around the world.
