Argentina sees declining trend in inflation

BUENOS AIRES, Argentina – Argentina’s government is forecasting a decline in consumer prices but few residents have the same optimism after seven years of double-digit annual increases. 

Indeed, differences between the government’s official inflation report and opposition estimates have again raised questions about the veracity of the government’s calculations. 

Inflation rose 2.6 percent in March compared with February, Economy Minister Axel Kicillof reported Tuesday, a slowdown from month-over-month rises of 3.4 percent in February and 3.7 percent in January. 

But the government number for March was less than the average 3.3 percent estimate of private economists, as calculated by opposition lawmakers. 

“They are continuing to lie to us about inflation,” Aldo Pignanelli, an economist and former central bank president, said on Radio Mitre.

The government’s calculations have been under the spotlight since 2007 when officials first started tampering with the data to show lower inflation. The national statistics agency, Indec, has shown steady inflation of 10 percent annualized since 2007, while private estimates say it has averaged 20-25 percent a year over the same period and could surpass 35 percent this year.

The low numbers brought questions from the International Monetary Fund, which last year threatened to throw Argentina out of the group unless it cleaned up its data reporting.

In January, the government produced a new national inflation index showing inflation more in line with private estimates. But the lower-than-expected government number in March has renewed the questioning, at least domestically.

Kicillof credited the slowdown to a system of price controls on more than 100 basic goods at supermarkets. He added that “the deceleration” extended into the first half of this month, led by a slowdown in price increases for food and beverages.

Inflation is showing signs of a “declining trend” that will continue, said Jorge Capitanich, the president’s chief of staff, Wednesday, a day after the government release.  

Yet few outside the government believe or expect inflation to slow. A survey published Wednesday by the Torcuato Di Tella University in Buenos Aires indicated a consensus forecast for inflation of 37.5 percent over the next year, among the world’s fastest.

And according to the IMF’s World Economic Outlook report published earlier this month, Argentina ranks third in the world for fastest inflation with a rate of 30 percent, trailing Venezuela at 56 percent and Sudan at 42 percent. It is ahead of Iran, where inflation is 22 percent.

The IMF expects Argentina’s economy to grow 0.5 percent this year and 1 percent in 2015, down from 4.3 percent in 2013.

Most economists, however, say the economy could fall into recession this year after growing steadily since 2003, bar a brief contraction in 2009.

“High inflation has been hurting the economy since 2005 when it rose at twice the pace of international levels,” said Martin Polo, chief economist at Analytica Consultora in Buenos Aires. “And this has happened while most countries have calmed inflation.”

Indeed, the IMF’s report shows that inflation averaged 1.2 percent in developed countries in 2013.

“Argentina is on track for a recession,” Polo said. “It won’t be an explosion, but it could be a long and drawn-out recession with high inflation.” 

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