World Economy

Argentine Inflation Could Reach 40%

Argentine Inflation Could Reach 40%
Argentine Inflation Could Reach 40%

Argentina’s inflation will likely be 38% this year, according to the average analyst estimate in a Reuters poll, though the effect of price increases put in place by center-right President Mauricio Macri will ease in the second half.

Macri, who took office in December, has promised to attract investment and cut government spending as the country continues to grapple with high inflation figures and a stalled economy.

His government has lifted capital controls, spurred a 26% devaluation of the peso and cut export taxes, as well as subsidies for gas and electricity, raising utility costs.

Retail prices will increase between 34% and 40% this year, despite expectations that inflation rises will slow to 1.5% per month in the final part of 2016, seven analysts polled by Reuters said on Friday.

The average of the survey showed consumer prices will increase 37.7% this year, while the median was 38%.

“At this time we project inflation of 38.5% compared year-on-year with December 2016,” said Santiago Mosquera from Estudio Bein consulting firm.

“Although we agree we will see a deceleration in inflation in the second half, given the low comparison base from last year, only in November and December will it begin to fall,” he said.

Argentina’s government has said it expects inflation around 25% for this year and 17% for 2017. Inflation will fall to 5% by the end of Macri’s term in 2019, the government has said.

The current government halted the release of economic indicators while it revamped the state statistics agency, but new official inflation figures are expected on Wednesday.

Consultants Ecolatina predict inflation of 40% for 2016, while former central bank president Rodolfo Rossi said consumer prices would be up 34%.

Though the majority of analysts said the previous center-left government stoked inflation by printing additional money to finance the deficit, prices have also been pressured by the rises in utility charges introduced by Macri.

Some estimates put inflation for April, when the impact of the charge increase has so far been felt the most, at 7%. In 2015, inflation increased by 30%, the analysts said.

Despite the devaluation, the peso strengthened by 1.97% in May, trading at its highest level since January.