Argentina’s Rising Inflation

Argentina has experienced high levels of inflation for several years. In 2005, Argentina had an inflation rate of 10%. During the past 5 years, Argentina’s rate of inflation has shot up dramatically, reaching 72% in 2022. The ongoing war in Ukraine, supply-chain constraints related to COVID, and large increases in public spending by the Argentinian government have contributed to the rise in prices.

In comparison, during the same period, the average inflation rate for the rest of the world has remained under 10%. This suggests that Argentina’s public spending policies and taxation mechanisms are creating a significant shortfall which the government has tried to offset by printing money. To make matters more challenging, Argentina has endured a severe drought during recent months, which has led to a reduction in crop production and a rise in prices.

The IMF has been assisting the Argentinian government ($44 billion USD loan program) and asked that the country meet certain economic targets and address its monetary policies. The IMF forecasts a decline in Argentina’s rate of inflation over the next few years. However, such a reduction in inflation is subject to the effectiveness of the Argentinian government to manage its fiscal and monetary policies.

Inflation in Argentina relative to World average (1998 through 2028).