Amid moderate global concern over the return of inflation, Argentina again recorded the region’s second-highest increase in May

Amid growing global concern about the return of inflation, Argentina again stalled in May with the second highest increase in Latin America.

Again, as in recent years, Argentina posted an increase last month that was surpassed only by Venezuela, the country with the highest inflation in the world and which suffers from a hyperinflationary situation.

Although the issue of inflation has returned to the analysis of country authorities and analysts as restrictions are lifted globally, it is not a matter of concern so far. In this sense, the United States recorded 5% per year in May and Germany 2.5%, its largest increase in the last decade.

In Argentina, cWhen INDEC’s consumer price index (CPI) data is confirmed, it will be known that Inflation was once again around 4%, although a figure which the government said was less than 4.1% in April. For consulting firms, it was on average 3.8%, with however a large dispersion between 3.2% in the Ferreres study and 4.7% in the FIEL.

In any case, eThe only record above this figure was verified at 19.6% in Venezuela last month by the Venezuelan Observatory of Finances; Thus, the country ruled by Nicolás Maduro accumulates an increase of 2,940% in the last 12 months. The rest of the region’s major economies total, among all, almost as much as Argentina added during the month.

Brazil posted inflation of 0.8% last month and 8% last year, accelerated, as in other countries, due to rising food prices. Analysts consulted by Latinfocus expect it to reach 5% by the end of the year. However, as we see, This phenomenon is not enough to explain the continuous rise in prices in Argentina, where food is also increasing more than in the rest of the region.

In fact, according to Eco Go who runs Marina Dal Poggetto, the increase in foodstuffs in June would be 3.7%, while general inflation would reach 3%.

In Mexico, inflation was 0.2% last month and 5.8% in the last 12 months; It is estimated to close at 4.3%, against 48.3% expected by private analysts for Argentina. If this forecast came true, the year would end closer to 53.8% of Mauricio Macri’s last year of presidency than to 36.1% of 2020.

In Colombia, overwhelmed by social protests, it reached 1%, but accumulated 3.3% last year and a cumulative of 3.2% is expected for next December. In Paraguay, the price increase was 0.6% last month and 3.7% last year; analysts expect it to end the year with 3.3%.

As, Uruguay experienced 0.4% in May and 6.6% last year; It is estimated that it will close with 7.2% at the end of the year, below -although far- from Argentina. Chile registered 0.3% in May and 3.6% last year, around 3.3% which should accumulate for December. For its part, Ecuador recorded 0.08% last month and -1.1% last year; an annual deflation of 0.1% is expected.

Finally, Bolivia saw a 0.2% drop in price levels last month and 0.5% inflation last year; it is estimated that it will reach 2.7% at the end of December in cumulative terms.

The setting for the rest of the year

After almost half the year, analysts and the economics team know that the 29% annual inflation target set in Budget 2021 is a pipe dream, but the question is how far it will go.

In this sense, a report by the Center for Economic Analysis Equilibra – headed by Martin rapetti Yes Diego Bossio- play with three scenarios: in the base case, with more probabilities, it would reach 47.3%; in the most pessimistic 52% and, conversely, 46.9% percent.

Rapetti thinks it is it should see a dynamic close to 3% in the coming months, which includes a negotiation without much progress or dismount with the International Monetary Fund (IMF), to keep the foreign exchange market relatively calm until the elections next November.

“Our baseline scenario assumes that due to the pandemic, the economy would continue to operate with relevant restrictions on mobility until August, and debt negotiation would avoid a default with the Paris Club until that an agreement with the IMF is reached after the elections “, declared Rapetti, executive director of this new study center.

In this context, “activity should contract by 2.1% in the second quarter due to health restrictions and then a recovery would begin which would allow it to reach pre-pandemic levels by the end of the year” .

Domestic demand would be the engine of the recovery in the second half of the year, “mainly due to two factors: the injection of public funds and the rise in wages and pensions above inflation contained by the exchange rate and anchor rate “.

“Government would avoid currency surges during pre-election months. The year would end with 7% growth and 47% inflation», Declared the economist who went through CEDES and CIPPEC.

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