Consumer prices rose 3.9% in Argentina in January as inflation accelerated for a second consecutive month, the national statistics office INDEC reported on Wednesday.
Over the past 12 months, prices have increased by 50.7%, one of the highest rates in the world.
January’s increases were led by food and non-alcoholic beverages (up 4.9%) and healthcare (4.1%), with prices rising overall last month to their highest level in 10 months .
Tackling runaway inflation is one of the key issues the government is discussing with the International Monetary Fund (IMF) as it seeks a new financing program to restructure more than $44 billion in debt.
Late last month, President Alberto Fernández announced that the two sides had reached an agreement in principle to restructure the remainder of the record $57 billion stand-by loan agreed in 2018 with the previous government led by the former President Mauricio Macri.
Argentina’s government, which wants to strike a deal by the end of March, is seeking a new Extended Funding Facility (EFF) program that will run until 2034.
Last year, Fernández’s government extended a series of price freezes to bring down the prices of essential items. Last month, it reached a new agreement with producers based on the items that make up the basic basket of goods, limiting increases to 6% through March.
Economist Sebastián Menescaldi, of consultancy EcoGo, said the acceleration in inflation in January could be “partly” explained by the easing of price controls. He said that while the IMF deal “will provide certainty, in the short term it will force further changes in relative prices” – citing, for example, the ripple effect of a potential reduction in subsidies for energy and transport prices.
The latest Central Bank Expectations Survey, based on reports from 39 banks, consultancies and economic research centers, projects an annual inflation rate of 55% for the 12 months of 2022.
“The impact of international inflation is difficult to calculate, but in February we already see it in the rise in bread and meat prices. We estimate inflation of 3.4% for this month. [February]but five percent for food,” Menescaldi said.
Communications (7.5%) was the main driver of price increases in January, driven by an approved increase in telephone and internet services, followed by restaurants and hotels (5.7%) and miscellaneous goods and services , which include personal hygiene items (4.3%), reported INDEC.
Recreation and culture also topped the monthly rate with a 4.2% increase and health with 4.1%, due to the increase in prepaid drug services.
Argentina’s economy, which had been in recession since 2018 and fell 9.9% in 2020 amid the coronavirus pandemic, recovered in 2021 and grew 10.3% in the first 11 months of the year.
According to estimates by the Ministry of Economy, last year will end with a rebound in GDP of more than 10%, with the economy still expected to grow by 3% in 2022.
Economy Minister Martín Guzmán said the agreement reached with the IMF, which must be approved by Congress, will not involve austerity or a brake on growth.
The government wants to reach an agreement with the Fund quickly and be ready to introduce a bill outlining the agreement with the IMF when the regular sessions of Congress open on March 1.
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