This month of December has all the conditions to become the scenario of the highest inflation of the year. In principle, because seasonally, it usually includes price increases linked to higher consumption due to the holidays. But new ingredients are also added: the "liberation of prices", announced by Javier Milei along with the end of the Fair Prices program; November's high drag on food prices, which rose sharply after the elections. And also, the expectation of a devaluation of the exchange rate that will impact prices. This combo is what leads economists to raise the price index forecast beyond 20% per month.
For the time being, the consultancies have very "preliminary" data given the context of uncertainty. Although they agree on the strong acceleration that is being recorded at the end of the year.
According to Rocio Bisang, an economist at the consulting firm Eco Go, "There are several things that have an influence: on the one hand, the jump we saw after the ballotage leaves a significant drag that will have an impact on inflation in December," she warns. "On the other hand, if it is indeed devalued, we expect to see an increase in prices, which will be greater or lesser depending on the new government's ability to set expectations."
For the analyst, this is compounded by the end of price agreements. "And today we are seeing an increase in the value of the hacienda in the Cañuelas market that could have an impact on meat," he adds. Finally, it could have an impact eventually in December or later, a jump in rates if the government seeks to reduce the deficit, he says.
According to the experts, all the forecasts they can share are relative because it will not only depend on the exchange rate that the new government decides to establish but also on the pass through, that is, on the magnitude of the passage to prices.
According to Juan Luis Bour, economist at FIEL, "there is no way that inflation for the month will fall below 19% and it may be 21%, given the carry over in November plus the adjustments that are operating," he explains. "The strong issuance of the month does not help," according to the analyst. "The only thing that helps is the stability of the gap and, of course, the package announced by the new government is central," he says.
"According to our estimates, December will mark an inflation rate of more than 20%," warns Jeremías Morlandi, director of Public Policies at the Center for Economic Studies Argentina XXI (CEEAXXI). "With the data as of today, we see that 2023 will end with inflation close to 200%."
According to the analysis of this source, "the reasons for the increases are in the impact of Sergio Massa's economic policies at the head of the Ministry of Economy. Excessive monetary expansion and increased spending will have effects that are lagging behind and will continue into 2024."
On the other hand, it will reflect the policy of price controls, which will eventually have to be released to unblock the economy, based on the objectives of the new administration," according to Morlandi. Beyond this context, for next year, the study center forecasts a price increase of around 80% for the first quarter of the year.
According to the Libertad y Progreso Foundation, this year will close with an inflation rate of more than 180%. And that projection is based on a 15% estimate for December inflation.
Unlike other forecasts, inflation would accelerate in 2024. According to the entity, it will exceed 200% during the first six months of next year. "It is crucial to keep in mind that this increase in inflation will not be attributable to the monetary policy of the next government, but rather to the need to make transparent the situation inherited from the current government, which is considerably worse than in 2015," says Eugenio Marí, chief economist at the Foundation.
According to his vision, "to avoid a hyperinflationary crisis, it will be imperative that the new government demonstrates from day one its commitment to implementing meaningful measures to change the economic course."
"Fiscal balance will be established as the fundamental anchor, and that will allow us to relieve the pressure on the issuance of money and the accumulation of debt," according to Marí. "In this context, it will be necessary to carry out a reform in the monetary-exchange scheme, moving towards an exchange rate unification whenever it is possible to capitalize the Central Bank of the Argentine Republic (BCRA), which is currently facing serious financial difficulties," the analyst diagnosed.