Argentina’s inflation rate has significantly improved, dropping to 2.2% in January, the lowest since mid-2020, following strict austerity measures. The annual rate stands at 84.5%, below 100% for the first time in two years. While economic reforms have led to a public account surplus, austerity has caused a recession and increased poverty, affecting over 52% of the population. Despite hardships, President Milei maintains strong approval ratings as citizens hope for future recovery, with projections of economic growth in 2025.
Argentina’s Inflation Decline: A Shift in Economic Trends
After years of persistent increases, Argentina’s inflation rate has shown signs of improvement, registering at a notable 2.2% in January. This figure marks the lowest monthly rate since mid-2020 and follows a challenging 13-month period of austerity measures under the ultraliberal presidency of Javier Milei.
The January inflation report, released by the National Institute of Statistics (Indec), confirms a downward trajectory that has emerged in recent months, resulting in an annual inflation rate of 84.5%. This is a significant decline, dipping below the 100% threshold for the first time in two years, as it was previously recorded at 98.8% in January 2023.
Economic Adjustments and Their Impact
January’s figure is the lowest since July 2020, when inflation was recorded at 1.9%. While an annual rate of 84.5% indicates that Argentine inflation remains among the highest globally, the ongoing decline signals a remarkable shift in macroeconomic conditions for the third-largest economy in Latin America. Projections suggest inflation could reach 211.4% by the end of 2023 and 117.8% by the close of 2024.
Economy Minister Luis Caputo expressed optimism on social media, noting that the disinflation process is continuing under Milei’s administration, which he credits to a stabilization strategy founded on budgetary, monetary, and exchange reforms. President Javier Milei also shared his enthusiasm online, urging citizens to bid farewell to inflation.
During his first year in office, Milei has focused on restoring budgetary equilibrium through drastic measures, including a sharp 50% devaluation of the peso, significant cuts in public spending, and limitations on monetary issuance. For the first time since 2020, Argentina ended 2024 with a surplus in public accounts.
Despite these measures, the social consequences of austerity have been substantial. Argentina has experienced a recession, with economic activity declining by 2.1% year-on-year in the third quarter. Job losses have tallied around 185,000, significantly impacting the public sector, which has seen a decrease of 51,000 positions. This situation paints a sobering picture of the overall labor market in a country where informal employment comprises over 40% of the workforce.
Poverty levels have surged, exacerbated by the initial devaluation and job losses, rising to over 52% in early 2024. Although the government claims the poverty rate has since dropped below 40%, independent social observatories report figures just shy of 50%. Consequently, many Argentines face challenges at the end of each month, grappling with job losses, cuts in subsidies, and reduced pensions.
As Miguel Baldazarra, a 75-year-old retiree, lamented, “We can’t buy anything, not even meat,” reflecting a significant decline in meat consumption of 9% over the course of 2024. Nevertheless, polls indicate that Javier Milei retains considerable support, with approval ratings hovering around 45% to 50%. Amidst the backdrop of disinflation, some citizens express a willingness to endure these tough times in hopes of a potential recovery, with predictions of 5% growth for Argentina in 2025 made by the government and organizations like the IMF.