Argentina’s battle against inflation continues as the National Institute of Statistics and Census (Indec) reported that January 2025 saw a decrease to 2.2%, down from 2.7% in December. This news marked a positive turn in the country’s economic landscape, with year-on-year values standing at 84.5%. These figures reflect the lowest Consumer Price Index (CPI) since July 2020, during the peak of the Covid-19 pandemic, and represent the best outcome under President Javier Milei, who assumed office in December 2023.
Key Highlights from the Indec Report:
- The rise in utilities and tourist items drove the increase in inflation.
- Price hikes were most notable in Restaurants and Hotels (5.3%) and Housing, Water, Electricity, Cooking Gas, and Other Fuels (4%).
- Food and Non-Alcoholic Beverages experienced a 1.8% increase.
- Education costs increased by 0.5%, while Clothing and Footwear saw a 0.7% decrease.
- The Core CPI increased by 2.4%, while Seasonal measurements showed a 0.6% rise.
President Milei’s administration aims to further combat inflation through strategic measures, including exchange rate control, wage policies, and fiscal anchors. Despite these efforts, the increasing cost of meat may temper the effectiveness of these strategies as explained in Buenos Aires.
Retail Sector Insights:
- Small and Medium-sized Enterprises (SMEs) experienced a rebound in sales, but overall consumption declined.
- Supermarket sales decreased by 5-6% compared to the previous year.
- Retail sales in smaller businesses showed improvement, with a year-on-year rebound of 25.5% in January.
In response to the economic challenges faced by Argentine households, the government plans to reduce the crawling peg – a mechanism governing the parity between the Argentine peso and the US dollar – by 1% monthly to better regulate inflation. Additionally, the elimination of the PAIS tax, coupled with adjustments in the exchange rate, aims to combat inflationary pressures.
Economy Minister Luis Toto Caputo had forecasted a 2.3% inflation rate, and with current figures aligning closely with this projection, there is optimism for sustained improvement.
Argentina’s ongoing efforts to stabilize its economy and combat inflation require a multifaceted approach, encompassing targeted policies and strategic adjustments to drive long-term sustainability and growth.
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