Perfil (Sabado)

Government prepares pitch for post-world Cup clash with inflation

- by ALEJANDRA GALLO

What we Argentines should be thinking about now is how we can win the World Cup with [Lionel] Messi,” said President Alberto Fernández, speaking before his trip to France and Indonesia this month.

The comment was a nod to recent remarks on inflation – which in the second half of this year has already reached a floor of six percent a month – by Labour Minister Raquel ‘Kelly’ Olmos. “First we win the World Cup, then we continue [with the fight against] with inflation; one month does not make a difference,” she said. She later apologised for the remark.

The concrete fact, at least so far, is that in the first 10 months of this year prices rose 76.6 percent, according to the INDEC national statistics bureau.

Politician­s usually find that the World Cup, especially in Argentina, can become a distractin­g “ally,” one that covers up fundamenta­l issues, such as three-digit annual inflation. But in this case, whatever the result on the field in Qatar, football’s greatest tournament does not seem to be able to work enough magic to decelerate prices.

In this context, the first quarter of next year already looks complex. Prices will rise by around 20 percent, according to a survey of the country’s main consultanc­y firms and analysts carried out by Perfil. These economists question the lack of an indepth programme to combat inflation and denounce the “patchwork plan” adopted by the government.

A rise in these levels in the first three months of next year also casts doubt over the government’s 60 percent annual target set out in its 2023 Budget bill. It also questions the three-percent monthly inflation target that, according to Economy Minister Sergio Massa, will be in place for the October elections.

Expectatio­ns for 2023 carry a yellow warning light. How empty the pockets of Argentines feel at the beginning of the year will set the mood for the whole of 2023. Most of the consultanc­y firms, contrary to the government’s estimates, estimate that inflation will also be in three digits in December 2023. There is still a long way to go and Massa knows it.

Nor is the minister unaware that March is a month with special characteri­stics. Seasonally, it is the time when the economy starts back up again and, in general, there is a high seasonalit­y in terms of prices.

That same month also sees the end of the Precios Justos price-controls scheme, which the economic team is betting on to deflate the prices of goods on shelves. Although the programme will surely be extended, a new stage of the adjustment in electricit­y and gas tariffs will also kick in come March, which will have its correlatio­n in every part of the production chain.

As if that were not enough, the same month will also see the accumulati­on of large debt maturities. Depending on the strength of the Central Bank’s reserves at that time, the financial market does not rule out exchange rate tensions, which could in turn influence prices further.

What is also on the table for the companies that set the agenda for the private sector is how much access they will have to imported inputs that allow them to maintain the pace of production and the level of activity. Shortages in this regard would also put further pressure on rising prices.

In short, much remains to be seen – just like the national team’s progress at the World Cup. We must see what steps the government plans to take to tackle, strongly or weakly, Argentina’s damned inflation.

Expectatio­ns for 2023 carry a yellow warning light. How empty the pockets of Argentines feel at the beginning of the year will set the mood for the whole of 2023.

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