Monthly inflation in economically troubled Argentina reached 4.2% in May, the lowest in two and a half years, mainly due to a drop in consumption, statistics agency INDEC said Thursday.
In the first five months of 2024, the rate stood at 71.9%, and in year-on-year terms, at 276.4% – below the 289.4% recorded in April, but still at record levels.
The rate fell for the fifth consecutive month in May.
In December, when President Javier Milei, who reduced the budget, took office, inflation increased by 25.5%, caused by the devaluation of the peso by more than 50%.
Self-proclaimed “anarcho-capitalist” Milei has promised to halt Argentina’s economic decline and reduce the budget deficit to zero.
He cut public spending, cut the cabinet in half, eliminated 50,000 public jobs, suspended new public works contracts and removed fuel and transport subsidies.
In April, Milei praised the South American country’s first quarterly budget surplus since 2008.
The Minister of Economy, Luis Caputo, celebrated the May data on Thursday as indicating a “deepening of the ongoing disinflation process”.
– ‘Significant drop in consumption’ –
Critics say Milei’s few victories have come at the expense of the poor and working classes, and are unlikely to last.
Economist Hernan Letcher, from the economic think tank CEPA, told AFP that the drop in inflation was largely explained by a “significant drop in consumption”.
“We, consultants, hope that the process of reducing the inflation rate will not continue in June,” he stated.
“The market expectation survey shows that a level of around five percent will be maintained until the end of the year.”
Consumer consumption, manufacturing and construction fell due to the devaluation of the peso and Milei’s budget cuts, with a 5.3% contraction in economic activity in the first quarter.
The International Monetary Fund expects Argentina’s economy to contract 2.8 percent this year, after a 1.6 percent decline in 2023.
The government this week reported a 16 percent increase in real wages in the private sector in April and a recovery in purchasing power that is “the most significant since 2009”.
However, it is a relative number, in a country where informal employment represented more than 45 percent of the workforce, even before the impact of Milei’s austerity measures began to hit the country.
Poverty in the South American country is now 55.5%, according to the Pontifical Catholic University’s Social Debt Monitor.
Last month, Argentina launched a 10,000-peso note, worth the equivalent of about 11 dollars – five times the face value of the previous largest 2,000-peso note.
Thursday’s inflation data came hours after Milei’s first victory in the Senate, which approved a modified version of his economic liberalization package.
Milei’s bill, which calls for the privatization of state-owned companies and weakens labor protections, has drawn the ire of workers and the left, who fought ongoing battles with police outside Congress on Wednesday.
The bill must still receive the final green light from the Chamber of Deputies.
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