He arrived at the presidency just six months ago and has already made a lot of noise in the world with his tone and manner of breaking with the past. Miming to cut public spending with a chainsaw, Javier Miley During his election campaign he had promised a no-holds-barred fight against the high inflation in Argentina and begins to reap the first fruits. In the third week of June, the prices of food and beverages remained unchanged compared to the previous week. This had not happened in thirty years.
So far, prices have been increasing week after week. The president could not help but celebrate the data on social media, also because these are difficult times for the population.
Argentina inflation down on monthly basis © Creative Commons License
Argentina inflation slows sharply on a monthly basis
Inflation in Argentina fell in May on an annual basis for the first time since last July, but still at 276.4%. In April it had jumped to 292.2%. More interesting, however, is the graph of monthly variations. It allows us to understand how consumer prices are moving in this phase, rather than in comparison with last year. Well, in the month in which Milei took office, last December, growth had been 25.5%. Since then it has done nothing but fall to 4.2% in May. This means that in six months, however, the cost of living has more than doubled: +115.6%.
Budget surplus in Argentina © Creative Commons License
Improve the state budget
The results are coming through the reduction in public spending and the first budget surplus in the first four months of the year since 2008. Although it is worth 0.2% of GDP, it signals a drastic reversal of the trend in Buenos Aires. Subsidy cuts, a halt to new public investment and state hiring, as well as a halving of the number of ministries, etc.
All measures that serve not only to improve the budget, according to Milei, but also to tackle the root cause of inflation: the excess spending monetized by the central bank.
GDP in decline
Since the settlement it has become necessary maxi-devaluation of the exchange rate of 54%, in order to replenish foreign exchange reserves and prevent the country from running out of dollars with which to import. At the rates of May, inflation in Argentina would grow by 64% in a year. Still too much. It is likely that the decline will continue, also because fiscal austerity is having a collateral effect of contraction of GDP. If in the fourth quarter of 2023 there was a -2.5% cyclical, in the first of this year the figure slightly accelerated downwards with a -2.6%.
Argentine inflation down, return to growth also needed
Milei himself estimates that the poverty be “at least 60% of the population”. He promised hard times, but possibly short, to bring the Argentine economy back to growth without the excesses of debt and inflation of recent decades. It is a difficult task, but the first results are coming. In the meantime, he is traveling far and wide around the world to convince the business world to invest in Buenos Aires. Recently, we saw him participate in the G7 in Puglia, invited by Prime Minister Giorgia Meloni with whom he enjoys an excellent feeling. He must be president quickly, because so far his popularity has remained high, despite his sacrifices, as the Argentines recognize that he wants to change pace and that he is not responsible for the crisis. But if this lasted too long, they would start asking him to account for it too. With all due respect to the reforms.
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