Inflation in Argentina at its lowest level in five years

Inflation in Argentina fell to 1.5% in May, its lowest level in five years, according to data released Thursday, confirming a slowing trend after a year and a half of austerity policies by the Milei government.

Inflation returned to its level of exactly five years earlier, in May 2020. Over one year, it reached 43.5%, compared to 211% at the end of 2023, according to data from the National Institute of Statistics (Indec). It remains one of the highest in the world.

The price increase in May was driven by mobile telephony and internet (+4.1%), healthcare (+2.7%), and housing (+2.4%). Conversely, transport (+0.4%) and food and non-alcoholic beverages (+0.5%) saw limited monthly growth. The government of ultra-liberal Javier Milei welcomed these figures, attributing them to the success of his economic team's "orthodox stabilization plan."

The latter "put an end to monetary issuance" and "removed exchange controls," presidential spokesman Manuel Adorni recalled on his WhatsApp channel, referring to the exchange controls in force since 2019 and partially lifted this year.

The perception of some Argentines, however, contradicts the indicators, fueling social discontent. The government "makes you believe that, month after month, inflation is falling. I don't know what they're basing this on, but it's not prices. For me, nothing is going down. I don't see it in my wallet, anyway," said Cristian Rodriguez, a 45-year-old logistics worker, interviewed by AFP.

"Wages are frozen, we haven't had a raise for a year," he said, adding that he had to give up simple pleasures like going to restaurants.

According to a recent report from the Di Tella Private University's Finance Center, Argentines' perceived inflation is twice the rate calculated by Indec. In May, perceived inflation reached 4.23%, according to the study.

Last year, Argentina recorded its first budget surplus in a decade, but the consequences were a loss of purchasing power, jobs, and consumer spending.

In early June, thousands of people, including scientists, doctors, people with disabilities, and women's rights activists, joined retirees in a mixed protest in Buenos Aires against the Milei government's austerity measures.

Argentina, Latin America's third-largest economy, with chronic debt and a precarious financial position due to meager foreign exchange reserves, received $12 billion (9.7 billion francs) from the International Monetary Fund (IMF) in April, the first tranche of a $20 billion loan to support its economic stabilization plan.

This injection of fresh money is considered crucial by the government to replenish the Central Bank's foreign exchange reserves, stabilize the peso, and "exterminate inflation" sustainably, in the words of President Milei. And ultimately, to revive growth, which has been a missing element of the government's plan to date, after a 2024 recession (-1.8%).