Inflation in Argentina continued in May the gradual deceleration that began five months ago, to 4.2% for one month, the lowest in two and a half years, but remains an incredible more than a year, at 276.4%.
The May price index, published on Thursday by the National Institute of Statistics (Indec), fell below 5% for the first time since November 2022 when it reached 3.9%.
Therefore, the slowdown continues, for which the government of the ultra-liberal president Javier Milei is satisfied: after 25.5% in December – under the mechanical effect of the 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 third-largest economy still reached 71.9% in the first five months of 2024 and 276.4% in the twelve months (289.4% in April).
May inflation was mainly driven by the communications (8.2%) and education (7.6%) sectors.
But apart from the price index, consumption and activity are falling under the influence of December’s devaluation and comprehensive budget cuts.
The recession is starting, the economy has shrunk by 5.3% in the first quarter compared to the same period last year, and retail sales of small and medium-sized businesses have decreased by 16.2% since January.
-Poverty on the rise-
“The significant drop in consumption largely explains the decrease in the inflation rate since December,” economist Hernan Letcher, director of Argentina’s Center for Political Economy (CEPA), told AFP.
Argentina’s economy is expected to shrink 2.8 percent this year, according to the International Monetary Fund (IMF), after a 1.6 percent decline in 2023.
But for President Milei, the recovery is already here or almost there, with a 16% increase in real wages in the private sector in April: a recovery in purchasing power “the most significant since 2009,” trumpets the presidency.
The relative wage 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.
Denying recovery, the opposition and social movements cite the country as suffering, with poverty rising 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 Observatory. social debt (ODSA-UCA).
The latest official semi-annual figure, based on a special calculation, showed 41.7% of the poor at the end of 2023.
The inflation data is published a few hours after the Senate approved all the deregulatory reforms wanted by President Milei, who thus received the support of the parliament for the first time in six months in power.
Written by James BROOKS – © 2024 AFP