Forecasts: Inflation likely to exceed 48% in 2021

Private projections of inflation are averaging 48.4 percent for this year and 40 percent for next. The high levels of inflation in Argentina are the consequence of “precarious macro-economics,” which in the medium term could lead to “upheavals in the exchange rate and prices,” warned Pablo Besmedrisnik, the director of Invenomica consultants.

Several inflation projections for 2021 now top 50 percent – UBS bank (54.9 percent), Credit Suisse (54.1 percent), OJF consultants headed by Orlando Ferreres (51.8 percent), Moody’s (51.7 percent), Econométrica (51.6 percent) and Banco BBVA (50 percent).

Meanwhile, the official forecast continues to be the 2021 Budget estimate of 29 percent, although Cabinet Chief Santiago Cafiero recently admitted to Congress that it could reach 33 percent.

Besmedrisnik maintained that the 25.3 percent inflation of the first half of the year was “expected,” while explaining that the government is making “a very big effort to prevent (monthly inflation from escaping above 3.5 percent.”

“The government is using anchors like the exchange rate, frozen utility billing and some price controls but there are limits,” Besmedrisnik told the Noticias Argentinas news agency.

“The most probable thing is that [the government] will persist in these efforts until the elections, lowering inflation a bit, but doing this with forced anchors is short-term and I don’t think they will be able to keep it up for many months,” he said.

He added that these policies “are far from being a success or a deceleration of inflation, as the Economy Ministry says, because we’re talking about three percent monthly inflation, which works out to 46 percent for the year, abnormal figures by any standards.”

Besmedrisnik said that Argentina is “far removed from the inflationary processes worldwide, which average some 10 percent annually, so that the price rises have nothing to do with international prices but with unsolved endogenous problems.”

He considered that a successful macro-economic policy would consist of “sustaining the level of activity and lowering inflation to an annual 30 percent in the short term.”

“Argentina needs to be thinking beyond the elections towards a plan for normalising the economy because that’s a central point for drawing closer to the world, from which we are scandalously removed,” he pointed out.