Argentina inflation tops 160% spotlighting challenge for Milei

FILE PHOTO: A woman buys fruits and vegetables at a greengrocery store in Buenos Aires, Argentina, December 12, 2023. REUTERS/Tomas Cuesta/File Photo

By Hernan Nessi and Lucila Sigal

BUENOS AIRES (Reuters) – Argentina’s annual inflation rate hit 161% in November, faster than expected and the highest monthly figure this year, laying bare the daunting challenges new President Javier Milei faces in navigating the country’s turbulent economic waters.

The data is the first inflation readout since Milei took office last Sunday, promising to right Argentina’s flailing economy, including sky-high consumer prices that have sapped residents’ purchasing power and fueled rising poverty.

Inflation is expected to climb faster in the months ahead after Milei’s government devalued the peso over 50% this week, part of a wider shock package he hopes will eventually stabilize the economy that’s mired in its worst crisis in decades.

“This skyrocketing inflation is going to be tough for people,” said 46-year-old bricklayer Eduardo Casado as he worked in a home in Buenos Aires on Wednesday.

“Last week I bought two kilos of potatoes for 800 pesos and this week it cost almost 1,200 pesos. I don’t know if next week we’ll be able to afford to buy the same groceries.”

The monthly inflation was rate 12.8% in November alone, statistics agency INDEC said on Wednesday, above a Reuters poll that had expected an 11.8% monthly bump. That was a steep jump from an 8.3% rise in October.

Milei took office promising a sharp, painful fiscal shock to fix Argentina’s economic crisis, and on Tuesday his government announced an initial policy push that includes a more than 50% devaluation of the local peso currency plus sharp spending cuts.

Those measures, however, could supercharge inflation even higher in the near-term, with Milei having warned of tough times ahead and monthly inflation of 20-40% in the months ahead.

Latin America’s No. 3 economy has been battling a prolonged economic crisis that has steadily eroded the value of the local currency while plunging two-fifths of the population into poverty.

Casado, the bricklayer, said work was complex because prices of materials were constantly changing and it was hard to get by.

“It’s been a while since we’ve been making ends meet,” he said, adding though that he was supportive – for now – of the government’s austerity measures, which he hoped could help.

“I want to believe prices are going to slow down at some point.”

(Reporting by Hernan Nessi, Lucila Sigal and Aida Pelaez-Fernandez; Editing by David Alire Garcia, Anthony Esposito and Sandra Maler)