2021, the second highest inflation in three decades

Inflation for the last month of 2021 has been higher than the 37 analysts and consultants who participate in the Market Expectations Survey (REM) of the Central Bank had projected. The National Institute of Statistics and Censuses (Indec) has revealed that the Consumer Price Index (CPI) for December closed at 3.8%, so that inflation for the whole of last year ended at 50.9%. This result has shown that Argentina continues to be one of the few countries that sustains itself with scandalous inflation rates and that the 2021 result has been the second highest in 30 years, according to a report prepared by the economist Nadin Argañaraz. The highest in those three decades was in 2019, with 53.8%.

If the distribution by rank is considered, it can be seen that in two years inflation was greater than 50%, in two years it was between 40% and 50%, and in three years between 30% and 40%, points out the director of the Argentine Institute. of Fiscal Analysis (Iaraf). Inflation is a chronic symptom of the economic functioning of our country. The challenge of lowering it in a sustained manner is still fully in force, as has been the case for many years, defines the economist.

An average annual inflation of 18% for 30 years is something really worrying for economic and social development. With this inflation of 2021, the statistical drag for this 2022 (average inflation) is 18.7%. In other words, inflation will continue at high levels this year, continuing the distortions generated by high inflation, mainly for lower-income social sectors, warns Argañaraz.

In the Central Bank Survey (BCRA), experts predicted that this year’s CPI will be 54.8% year-on-year, while the forecast for 2023 has been 43.4%, while for 2024 it is believed that the index it could go down to 35%.

The rate of increase in prices began in 2021 with significant inertia (in the last quarter of 2020 it averaged 3.7% per month) and in the first three months of the year it rose one notch, averaging 4.1%, with a peak of 4 , 8% in March, recalls a report from Ecolatina. The early overflow of the official inflationary pattern (29%) motivated efforts to focus on controlling the dynamics of both the official exchange rate and rates, especially with elections on the horizon. Thus, the rate increases foreseen in the budget were suspended (authorizing only 9%) and the official exchange rate began to grow at a rate of 1% per month, increasing at the end of the year at half the rate of inflation and accumulating a delay of 13% in real terms, limits the consultancy. It should be noted that this dynamic could be carried out by the aforementioned at the fiscal and external level: the increase in the payment of subsidies did not compensate for the improvement in the primary result, while the greater availability of foreign currency facilitated the BCRA the administration of the moderate trajectory of the official dollar.

The exchange and tariff delay (the Government has already announced that it will allow an initial correction of 20%) and the strategy of mass consumer price agreements will not be enough for there to be a shock in the reduction of inflationary pressures. However, from the National Ministry of Economy they believe that, within the framework of a rise in prices at a global level, the Government continues to work to align expectations of prices and wages for 2022. In that orientation, the area that drives Martin Guzman registers the new stage of Care Prices, which includes a basket of 1,321 mass consumer products with prices agreed with more than a hundred companies.

According to the Fundación Libertad y Progreso, the administration of President Alberto Fernández had sporadic inflation relief in 2020, as a result of the 10% drop in economic activity. In 2020, annual inflation was 36.1%. As restrictions on circulation were lifted, the money injected by the BCRA to finance the expenses of the pandemic had an impact on prices, leading to inflation to reach levels above 50%, closing 2021 at 50.2 %, according to your calculations.

“In addition to the fact that inflation in 2021 was one of the highest in the series, it must be taken into account that there is a very important component of repressed inflation that will only be reflected in 2022. For example, last year the rates of Public services remained practically frozen and there was a delay in the exchange rate. As these variables are normalized, they will have an impact on inflation this year, ”said Diego Piccardo, an economist at the foundation.


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