Argentina reaches 50.9% inflation in 2021
Argentina closed 2021 with an inflation YoY of 50.9%, compared to the 36.1% registered in 2020, it jumped 14.8 points, in part, according to analysts, due to the high monetary issue destined to finance the fiscal deficit.
The National Institute of Statistics and Censuses of Argentina (INDEC) revealed this Thursday that the consumer price index (CPI) was located in December, compared to the previous month, at 3.8 percent.
The highest monthly price increase in 2021 had its peak last March with 4.8% and the lowest in August and November (2.5%).
Far is the projection of 29% per year that the Government of Alberto Fernández predicted in its Budget for 2021; and the strategy of delaying the increase in the official dollar, freezing the rates for public services and food were not enough to stop the rise in inflation.
The main increase in prices occurred last month in the restaurant and hotel sectors (5.9%), coinciding with the beginning of summer and the vacations of a good part of Argentine society.
In that line, they were followed by alcoholic beverages and tobacco (5.4%) and transportation (4.9%).
In the annual set, the greatest increases were in restaurants and hotels with 65.4%; clothing and footwear, 64.6%; and transportation, 57.6%. On the other hand, the category of housing, water, electricity, gas and other fuels was the one that changed the least (28.3%) due to the cessation of rate increases.
New freeze of the year
After knowing the data, President Alberto Fernández presented a new renewal of the “Care Prices” program, which integrates 1,321 mass consumption products with agreed prices until April 7.
“Inflation is not the result of the monetary issue but of many things that range from the psychological to the monetary,” said the president, convinced that “when inflation appears, no one suffers more than the one who lives on a salary because at some point At the moment it is overwhelmed and yields less”.
The year-on-year variation of inflation fell three tenths in December compared to the 51.2% recorded the previous month, while the monthly increase represented a jump of 1.3 points compared to the 2.5% monthly registered in November.
“The careful price policy is very successful, it has helped contain prices. But we know that it is not the only policy that can be carried out to contain inflation, which is a multicausal phenomenon,” presidential spokeswoman Gabriela Cerruti told the press.
The monetary issue
A factor that according to analysts is key to the acceleration of inflation is the monetary issue, the printing of new bills with which the Government has to cover the fiscal deficit and inject money into people’s pockets in the midst of the delicate situation of the country, with more than 40% of the population living in poverty.
Several state subsidy programs emerged in 2021, which, together with the restrictions to buy dollars and the freezing of basic service bills, sought to delay the increase in inflation.
“The official exchange rate was almost 10% behind and rates remained low, which are always components that help a lot to keep inflation from rising, however it continued to move upwards,” explained to Efe the economist of the consultancy Z Lab Gabriel Zelpo.
“We expected that inflation would continue to take off, because clearly, with the amount of issuance they made in 2020, it was very difficult for them not to have any reaction. In fact, it happened practically all over the world and Argentina was not going to be the exception,” he added.
For this year, Zelpo sees no improvement in the country’s economy, where inflation is a historical and structural problem.
“The same story of a bad year is going to repeat itself. Inflation, at least, should rise ten points and end with a balance above 60%”, he predicted for 2022, and anticipated that even if there is an agreement with the IMF -to refinance Argentine debts for more than 44 billion dollars – It will not serve to stop a spike in the value of the dollar and therefore a brake on price increases.
“A total shock of confidence is needed and for that it is necessary for the economic situation to change completely, something that will not happen,” Zelpo concluded.
According to the forecasts of private analysts consulted by the Central Bank, inflation would be 3.9% in January, which will continue at the same value for next February and will rise to 4.3% in March of this 2022.
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